Rig and Frac Spread Counts Near Benchmarks

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)

Metrics tied to U.S. drilling and hydraulic fracturing activity are approaching important benchmarks. Find out what those benchmarks are, along with what capital spending-related questions they spur from two of Rigzone’s regular prognosticators, in this installment of what to watch this week in the oil market.

Jon Donnel, Managing Director, B. Riley Advisory Services: U.S. rig and active frac spread counts are closing in on required levels to keep overall crude production flat with Fourth Quarter 2020 exit rates, which was the consensus target heading into the year. Current oil prices in the mid-$60-per-barrel range remain above levels baked into operators’ annual spending plans, setting up the question heading into earnings season as to whether those original capital budgets will be revised. So far, E&P companies have stuck to the mantra of “fiscal discipline.” We expect that will continue as the companies report 1Q21 results, which would support crude prices in the near-term.

Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: Drilling activity has picked-up and more previously drilled-but-uncompleted wells are being completed. The market will look for signs of this trend continuing. It appears that privately owned E&P companies have the most freedom to start new activity as publicly traded companies are staying disciplined in capital expenditures in deference to maintaining “free cash flow” for dividend distributions and stock buybacks. And, while the bullish signals of the past week have overshadowed the spreading of COVID-19 variants, the market will have to keep a close watch on this.

To contact the author, email mveazey@rigzone.com.