RigData Insights

Rebound in oil prices spur talks of reviving U.S. Drilling

  • Friday, May 22, 2015
  • Posted By Unknown

Some irrational exuberance may be affecting the oil and gas drilling outlook now, according to RigData analysts, writing in RigData’s RADAR Report. The recent rebound in oil prices has spurred talk among some operators of reviving drilling. Some point to early signs of US oil production declines that are scarcely rounding errors in the greater scheme of things but somehow seem to be moving the price needle up again. And some operators talk about “banking” uncompleted wells to await higher prices that seemingly are right around the corner—focusing their reduced budgets on drilling, which now comprises about 20% of a well’s cost vs. completions (frac jobs) that now account for the lion’s share of well costs. Conversely, other operators eye whittling down the frac backlog. But the RigData analysts wonder if these steps aren’t being viewed as somehow occurring in a vacuum—as if these looming new supplies won’t have an impact on prices, or that demand will ride to the rescue amid a still shaky recovery. Thus the threat persists of a W-shaped recovery in drilling.

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