Source: RADAR | September 21, 2017
Is the US land rig count’s “Big Stall” turning into the “Big Slide”? The Platts RigData News & Analysis team recently coined the former term as a way to characterize what’s been happening to the active rig tally in Q3. Specifically, it referred to an active rig count that had stalled in the low 900s in early 2H 2017 after jumping by +50% in the first half of this year.
Dating back to May, the week-to-week variance in active rig count as of end-July was +2.3; by end-August, it had dropped to +1.1. July and August were perfectly flat at 929 total active rigs each. As of last Friday’s sample, the week-to-week variance had shrunk further, to +0.6. More importantly, the latest sample represents a sequential decline of -14—the biggest week-to-week drop since April 29, 2016, which was also when the US land rig count had reached a record low. It was also the second time we’ve seen 2 consecutive weeks of decline in the rig count in Q3.
So is the rig count beginning a freefall and heading toward another bust? The Platts RigData team concludes that the market isn’t there yet, nor do they expect another rig count collapse anytime soon. That’s not to say the rig count won’t rebound the rest of this year either. The Platts RigData team doesn’t expect the rig count to improve significantly from current levels into 2018.
Instead, what we’re seeing now is the usual 3Q wind-down of drilling activity as operators spend down their annual drilling budgets ahead of yearend, mainly for tax purposes. That trend is reflected in the latest weekly numbers in RADAR, which show 6 fewer operators and 8 fewer active rigs in September to date vs. August levels. Hardly a collapse.
The Platts RigData team has said before that they don’t expect the US active land rig count to reach 1,000 this year. So far, the numbers comport with that view. But that doesn’t mean the bottom will fall out either.
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