Source: Rigs and Drilling Analytical Report (RADAR, July 12, 2018), S&P Global Platts Analytics

June Records for Private Companies' Market Shares, New Wells Drilled Per Rig Show Increasing Uniformity of Drilling   

As if to underscore the upending of traditional behavior by the evolving private oil and gas sector, the month of June ushered in a pair of records: the highest monthly market share on record for private companies and the lowest number of new land wells drilled per rig by all companies.

Traditionally—at least since we started tracking such metrics—private operators held their share of the market to less than 40% of all active rigs. This was irrespective of the rig count total and/or oil and gas commodity prices. From 2011 to mid-2016, the privates’ market share held steady at an average of 38%, ranging from 30% to 43%. Out of 124 reports on this metric, the privates’ market share had breached 40% only 24 times.

Since June 2016, the 53 market share reports show the privates have averaged a market share of 46%, topping 44% every single time. And it averaged more than 50% for the entire month of June, another first.

Typically, privates have built their market share gradually through the year, peaking in Q3, depending on the direction of commodity prices. Their rig counts and well counts were usually smaller in the first quarter of year as they secured financing for drilling programs, then they would taper off in Q4 or late Q3 as they spent down their drilling programs for the year to minimize the tax bite.

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Because of this behavior, the number of wells per rig would move up in accordance with a surging market for private operators. The nearby chart shows the quarters from 2014 inclusive through 2Q 2018, reflecting the boomand- bust iterations of the worst downturn for the oil and gas industry. Up until that point, oil prices were at lofty levels well above where they are now, and natural gas prices were at record highs. A great deal of stability had permeated the market on drilling for both resources, and the privates’ drilling market share had moved up in steady increments during the post-2009–2010 bust.

At the same time, corresponding with that development, the number of new wells drilled per rig would peak with the privates’ market share—all else being equal on commodity prices. That’s because the privates were focused on conventional reservoirs with vertical wells. Because vertical wells usually are drilled much faster, the nimble smaller, private companies could drill more wells per rig than the larger, usually public companies did. Even if you had 3 rigs or fewer—the rig fleet category long dominated by small privates—you could drill wells more quickly and have a greater number of wells per rig. Thus the number of wells per rig would wax and wane in synch with the privates.     And that gap only grew as larger companies focused more on increasingly complex horizontal wells. It was especially so as larger operators high-graded their drilling locations and executed ever more complex horizontal wells in pursuit of return instead of growth.

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No more. Our latest quarterly well counts report will be published Friday

the 13th of July, and the evidence is clear: For the first time we see private

operators’ market share has reached unprecedented high levels, and yet the

number of rigs per well have plummeted to unprecedented low levels.

That can only mean that the cohort of private operators has become increasingly tilted to companies focused on horizontal wells. And at last report, horizontal wells now accounted for about 88% of the market. As long as that metric holds—and we see no reason why it shouldn’t and even get bigger—the number of wells drilled per rig will slip.Because of the expanding ubiquity of horizontal wells, even as this ostensibly traditional marker for drilling efficiency declines, the production impact will become commensurately greater.

​Upstream Activity Data for North America 

For more information on North American upstream activity including permitting, drilling activity, production and completion data please contact S&P Global Platts via email CustomerService.RigData@spglobal.com or call 800-371-0083.

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