AuthorTopic: Hills Group Oil Depletion Economic and Thermodynamic Report  (Read 63380 times)

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🛢️ What Will Follow The Biggest US Rig Count Collapse In History
« Reply #255 on: May 13, 2020, 04:29:43 AM »
That's an EZ question to answer.  Further economic mayhem.

RE

https://oilprice.com/Latest-Energy-News/World-News/What-Will-Follow-The-Biggest-US-Rig-Count-Collapse-In-History.html

What Will Follow The Biggest US Rig Count Collapse In History
By Rystad Energy - May 11, 2020, 1:30 PM CDT


The Covid-19 pandemic has caused the largest horizontal rig count collapse ever recorded in the US, a Rystad Energy analysis of Baker Hughes data shows. The total horizontal oil rig count fell below 270 rigs last week, a 57% decline from the peak of 624 rigs seen in the middle of March 2020. Horizontal gas drilling was down to 70 rigs last week, which is 54% below the previous peak seen in June 2019.

The magnitude of the decline in horizontal oil drilling makes this downturn even more unique, compared to the previous downturn of 2015-2016, where declines all the way from the peak to the trough reached around 53% to 54%.

While we have not reached the bottom yet, we have most likely passed the peak pace of decline, both in absolute and percentage terms. After several weeks of observing a decrease of 50-55 rigs per week, the oil rig count was down by only 32 rigs last week. On a two-week basis, a 23.4% fall was recorded last week – certainly moderate in comparison to the peak two-week decline level of 25.6% seen the week before.

“The oil price crisis and the impact of Covid-19 has resulted in the most dramatic collapse of the US Land rig market in history. There are two key trends around basin mix; the share of Permian increased in terms of total horizontal oil drilling from around 62% to about 73%, while the share of gas in total horizontal drilling increased from 12% to 21%. We anticipate that both of these shares will continue to climb in the next few weeks.,” says Artem Abramov, Rystad Energy’s Head of Shale Research.

The number of counties with active horizontal oil drilling across the whole country has kept declining. Last week, North Slope in Alaska, Walker Ridge in Louisiana, and Ellis County in Oklahoma saw the departure of their last active rigs. This brought the total number of active counties in the country from 49 to 46, a record-low level in modern history.

Meanwhile, the number of active counties has stabilized in the state of Texas at 28 counties, and in the Permian Basin at 18 counties.

Total horizontal rig count in the Permian fell below 200 rigs and now exhibits more than 50% decline from the peak in March 2020. The three largest sub-basins, Delaware New Mexico, Delaware Texas and Midland North, are now diverging rapidly from each other in terms of the magnitude of decline. Delaware Texas is rapidly losing its rigs having fallen from the peak of 118 rigs to 44 rigs, due to both structural declines and the reallocation of some rigs to sweet spots in New Mexico.

Midland-focused operators with Delaware exposure have always prioritized activity outside Delaware acreage. Drilling in Delaware New Mexico stabilized last week, although additional declines might still be observed in the next few weeks. The relative resiliency of Delaware New Mexico can be largely explained by the lack of drilling activity declines realized by ExxonMobil and Devon Energy, which together account for around 50% of the active rigs now in the sub-basin.

The Midland North Basin is seeing more significant declines than Delaware New Mexico, though these declines are really driven by the eastern portion of the basin, which hosts Howard and Glasscock counties. Midland County, for example, exhibits only 44% decline from the peak, which is comparable to Lea County in New Mexico.

Outside of the Permian, declines persist in Eagle Ford, Bakken and SCOOP & STACK. The total horizontal rig count in these three basins combined is down to 59 rigs which is around a 66% decline from the peak activity level seen in early 2020. Horizontal drilling has been relatively flat in DJ and PRB basins in recent weeks, following a period of material downward adjustment.

Gas-focused drilling has kept declining gradually, although Haynesville is now exhibiting some signs of stabilization. Total horizontal gas drilling in Appalachia, which includes Marcellus and Utica, is already down to 35 rigs. The rig count could fall below 30 by the end of 2Q20 before stabilizing in the second half of the year.

By Rystad Energy
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🛢️ Is EIA Data Disguising A Disastrous Decline In U.S. Shale?
« Reply #256 on: May 14, 2020, 03:45:49 AM »
EIA data is about as reliable as BLS data.  ::)

RE

https://oilprice.com/Energy/Crude-Oil/Is-EIA-Data-Disguising-A-Disastrous-Decline-In-US-Shale.html

Is EIA Data Disguising A Disastrous Decline In U.S. Shale?
By Nick Cunningham - May 13, 2020, 7:00 PM CDT


The Trump administration claims that the U.S. is “transitioning to greatness,” and that energy companies are going to see “massive gains.” U.S. Secretary of Energy Dan Brouillette says there is “stability” in the oil market, and that economic activity will “explode” on the other side of the pandemic. Thanks to the leadership of President @realDonaldTrump, the transition to greatness is well underway, and our economy along with our U.S. energy companies are going to see massive gains on the other side of this pandemic. pic.twitter.com/EZ2DFnlcUw

Meanwhile, back in reality, U.S. oil production continues to decline as drillers shut in wells and cut back spending. Output has already declined by 1.1 million barrels per day (mb/d), and more losses are likely. New data from Rystad Energy predicts U.S. oil production declines of roughly 2 mb/d by the end of June.

“Actual production cuts are probably larger and occur not only as a result of shut-ins, but also due to a natural decline from existing wells when new wells and drilling decline,” Rystad said in a statement.

Energy expert Philip Verleger, in an article for Energy Intelligence reports that the magnitude of output declines is much larger. His latest research shows that production as of May 10 is down by almost 4 million bpd from its peak as the below chart shows.

Source: PK Verleger LLC

To be sure, the U.S. government is doing quite a bit to try to bailout the oil industry. A new report finds that some 90 oil and gas companies will benefit from the Federal Reserve’s corporate bond buying program. The Trump administration is also quietly reversing environmental protections on the oil and gas industry.

But in the face of a historic meltdown in the oil market, even handouts from Uncle Sam won’t stop declines. The U.S. oil industry continues to idle drilling rigs at a tremendous clip, and the rig count is down by more than half in two months. “[W]e think that the last time there was so little drilling activity in the US was the 1860s during the first decade of the Pennsylvania oil boom,” Standard Chartered analysts said. The investment bank said that the contraction was notably acute in Oklahoma, where rigs fell to just 11 across the state, down 89 percent from the same period a year earlier.

Related: Has Demand For Oil Already Peaked?

The sharp decline in rigs, drilling and completion activity means that the steep decline rates endemic to shale drilling will overwhelm what little new production comes online. Standard Chartered said that if activity were to remain stuck at current levels, U.S. production in the five main shale basins would fall by 2.89 mb/d by the end of 2020.

Those declines would come on top of the output that has only been shut in temporarily. Standard Chartered envisions a “squashed-W pattern” for supply, in which temporarily idled output comes back online in a few months, but more structural declines continue thereafter.

The EIA, characteristically, is much more optimistic about the state of U.S. supply. The agency said on Tuesday that it only sees a 0.5 mb/d decline in oil production this year, compared to 2019 levels. Notably, Secretary of Energy Dan Brouillette says production will increase in the third and fourth quarters as the economy roars back.

Others aren’t so sunny. A report from Wood Mackenzie released on Wednesday says that oil demand will take years to recover.

“Production is falling sharply in the US, and some producers are reluctant to sell forward,” Commerzbank wrote in a note.

But while some oil drillers have hesitated to lock in hedges, others have decided that they can stomach hedges at extremely low prices, not because they can profit at such low levels, but likely only to guard against another meltdown. “The strike prices achieved in the latest surge of hedging have been low, these appear to be hedges designed to improve the probability of survival should market conditions deteriorate further,” analysts at Standard Chartered wrote in a report.

“Some of the hedges have been fixed at very low prices: one company has a USD 20.73/bbl WTI hedge for Q2, another has three-way collars for Q3 and Q4 with a floor of USD 25/bbl Brent,” Standard Chartered added.

The unease from some drillers regarding oil prices is understandable. The Secretary of Energy may predict “greatness” ahead, but others see a long, protracted economic recovery.

By Nick Cunningham of Oilprice.com
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🛢️ U.S. Rig Count Collapse Continues Despite Soaring Oil Prices
« Reply #257 on: May 23, 2020, 12:02:26 AM »
https://oilprice.com/Energy/Energy-General/US-Rig-Count-Collapse-Continues-Despite-Soaring-Oil-Prices.html

U.S. Rig Count Collapse Continues Despite Soaring Oil Prices
By Julianne Geiger - May 22, 2020, 12:00 PM CDT


Baker Hughes reported on Friday that the number of oil and gas rigs in the US fell again this week by 21, falling to 318, with the total oil and gas rigs sitting at 665 fewer than this time last year—a more than 67% drop off in a single year.

The number of oil rigs decreased for the week by 21 rigs, according to Baker Hughes data, bringing the total to 237—a 560-rig loss year over year. It is the fewest number of active oil rigs in play since mid-2009.

The total number of active gas rigs in the United States held at 79 according to the report. This compares to 186 rigs a year ago.

The significant fall in the rig count over the last couple of months is also reflected in the EIA’s estimate for oil production in the United States, which fell again this week to 11.5 million barrels of oil per day on average for week ending May 15, which is 1.6 million bpd off the all-time high and 100,000 bpd lower than the week prior. It is the seventh straight weekly production decline.

Canada’s overall rig count decreased by 2 rigs this week, to 21 rigs. Oil and gas rigs in Canada are now down 57 year on year.

At 12:08 pm, WTI was trading down 2.92% at $32.93. Although down on the day this is nearly $4 up week over week. The Brent benchmark was trading down 3.22% at $34.90 on the day, but up nearly $3 per barrel week over week. The price dip on Friday is courtesy of market fears after China on Friday did not release annual economic outlook as was expected. 

By Julianne Geiger for Oilprice.com
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