Rigs and Spreads Sept. 15: Stabilization

  • Horizontal oil rigs stabilized this week

  • Rig counts

    • Total oil rig counts were +2 to 515

    • Horizontal oil rig counts were +0 to 459

    • The Permian horizontal oil rig count was up 1

    • The Canadian horizontal oil rig count continues to lag, down 24 from last year.  

  • The US horizontal oil rig count is falling at a pace of  -2.0 / week on a 4 wma basis.

    • This number has been negative for 41 of the last 42 weeks

  • Frac spreads rose, +12 to 264.  Again, this is not sustainable without rigs additions.

  • DUC inventory fell back to 16.4 weeks

  • We are approaching the moment of truth for the shale industry

    • For the last several months, the breakeven to add rigs has averaged around $77 WTI

    • At writing, WTI was $91

    • Lagged oil prices for the next eight weeks are consistently above $80 WTI, and at times well into the mid-$80s

    • As a result, we should in theory see at least modest life in the horizontal oil rig count

    • If we do not, it will be further evidence that the underlying problem is a lack of drilling opportunities, not unfavorable economics