One side effect of the downturn & its subsequent nascent recovery is the skewing of land rig efficiency metric as shown by Platts RigData’s Quarterly Well Count Report.

The well count, collapsed along with the US land rig count during 2015-2016, falling from a quarterly average of 9,425 in 2014 to a record low of 2,168 in 2Q 2016.

At the same time, active rig count fell from a quarterly average of 1,851 in 2014 to a record low of 384 in 2Q 2016. Changes in rig efficiency, as measured in the number of wells drilled per rig, were not as straightforward; at least in line with changes in commodity oil & gas prices.

That has everything to do with how various kinds of operators respond to market gyrations. The number of wells drilled per rig actually improved during the downturn, rising from an average 5.1 in 2014 to an average of 5.3 in both 2015 & 2016. That’s because large cap operators that had dominated drilling activity during the boom throttled back on batch drilling development from pads & switched to high-grading their prospects in prolific unconventional oil & gas plays to optimize returns with slashed drilling budgets in a low commodity price environment.

At the same time, the small private operators shrank their market share, from 39% to 36%, given their much lower economies of scale in shallow conventional oil reservoirs. With some oil & gas price recovery in the second half of 2016, the number of wells per rig in the two middle quarters of last year jumped to 5.6. At the same time, the market share held by private operators shot up from an average of 39% in the first half of last year to an average 48%; at one point hitting 50%. This rig efficiency benefit resulted from new activities by private operators. In early 2017, we saw another shift in wells-per-rig efficiency, as that metric shrank anew to 5.1 in Q1.

The private companies’ market share slipped somewhat, to about 45%. However, large caps’ market share was unchanged form 2H 2016, giving away some slices to major & mid-caps.

So we’re not yet seeing much of a secular pullback by privates, which always tend to diminish their ranks late in the year & early in the current market environment compared with what we saw during the boom. When we see these outlier trends start to flatten out again, that will point to the larger companies returning en masse to full paid development—probably at a commodity oil price level that will keep the privates upping their drilling budgets as well.

To check out the Platts RigData Quarterly Well Count Report, please click here.