This year, many US oilfield workers are getting the best gift imaginable – a call up to the rig. Christmas arrived early, and the gift this year is time at work not time off. After the past two years, most oilfield hands couldn’t be happier.
Back in October, the North American land market was bracing for a seasonal slowdown into year-end. Here’s the warning Halliburton CEO Dave Lesar issued on a conference call about 6 weeks ago:
“Based on current customer feedback we remain cautious around customer activity due to holiday and seasonal weather-related downtime. Our customers may take extended breaks, starting as early as Thanksgiving, and push additional work to the first quarter of 2017. As one customer told me, ‘Dave, it doesn’t make any sense for me to rent an efficient high-spec rig if I have to start and stop all the time for the holidays or the last five weeks of the year... I’d rather just wait until next year to start drilling.'”
– Dave Lesar, Halliburton Chief Executive Officer On October 19, 2016
This fourth quarter, the seasonal slump just isn’t happening in the Lower 48 as expected. In fact, just the opposite is playing out. E&Ps are actually trying to get ahead of a coming 1Q17 activity surge by getting some work done into year-end.
The US onshore rig count has increased 104 units so far this quarter – it’s usually down 30-50 rigs during 4Q. Some of this is OPEC, but we now believe 4Q16 was headed for a strong showing even without the decision to cut. With the rigs that have gone to work so far in the recovery phase and the rigs we forecast will go back to work early next year, one could argue that some 30,000 jobs are returning to the US oilfield. Just last week, we snapped this picture in front of a Halliburton yard in the Permian.
Last week, the US land rig count rose 27 units. That is the best single December week for the US onshore rig count since 2011, and the weekly rig count change has been in positive territory almost every week this quarter so far.
In the chart below, we show the weekly change for this quarter vs. the 5-year average 4Q, highlighting a massive departure from the norm. Even if we exclude 2014/2015 from the average because of the downturn, this 4Q is still abnormally strong by historical standards.
It’s too early to make a call on 4Q completions trends based on state data; however, we believe completions trends are pairing up nicely with the drilling trajectory (albeit on the traditional lag) at this point in the cycle.
Weekly Drilling Statistical Update For Week Ended 12/9/2016
The US onshore rig count rose 27 rigs to 601 running last week. The US land rig count is now up 227 rigs from the May bottom, with almost half of the gains coming from the Permian, where unconventional activity increased another 6 rigs last week.
About the source of this post: Joseph Triepke created Infill Thinking in 2016 to deliver high-caliber oilfield research updates to O&G decision makers. No ads. No clutter. No noise. Just research on the trends that matter most delivered to subscriber inboxes. Learn more about this new resource or try it free for 30 days.
