The downturn in 2020 was unprecedented and so was the plunge in rig activity levels, which was far more severe than any of the previous corrections. As oil prices recovered towards US$40/bbl in 3Q20, the oil rig count bottomed out and many producers cautiously started to redeploy them. The gradual recovery trend has become more visible in recent months, with the horizontal oil-focused rig count surpassing 270 units as of 12 February 2021, 80% higher than the 2020 low of 149 touched in August (Figure 1). Gas-focused drilling in the Appalachia and Haynesville regions also experienced a severe decline of approximately 60% through 2H19 and 1H20. The gas rig count stabilised in 3Q20 and select Haynesville producers have marginally increased their activity in the last few months.
Figure 1. US land horizontal rig count by main hydrocarbon type.
While the recovery in rig activity could at best be characterised as gradual, fracking activity – a more important indicator of short-term production potential – saw a robust rebound in 2H20 (Figure 2). Fracking activity declined faster than drilling in 2Q20 as many producers were able to ‘freeze’ or delay their pressure pumping contracts at no additional cost. That resulted in an abnormal bulge in the country’s drilled but uncompleted (DUC) well inventory, as many wells that were drilled in 4Q19 and 1Q20 were not completed on schedule in 2Q20. Hence, the cumulative DUC inventory provided the industry with ample flexibility in 2H20 and many producers were able to increase their frac activity, while maintaining a conservative rig programme. The existing anomaly in the DUC inventory will provide significant support to nationwide fracking deep into 1H21.
Figure 2. Permian started frac operations by week in 2020.
Rystad Energy has identified 909 started frac operations in North America for January, as of the week ended 12 February. Rystad estimates that there are at least 50 frac operations that it has not yet detected through satellite imagery analysis or the FracFocus registry, for a total of 959 jobs. As for February 2021, Rystad have already identified 201 jobs, 200 of which were identified exclusively by satellite analysis. Activity in the Permian Basin was strong in January, with 438 identified fracs, a large increase from the 249 recorded in December. In other US core oil plays, however, there was a stagnation, as the frac count stayed at close to 200. There was a slight decline in South Texas’ Eagle Ford, to 70 in January from 83 in December, which was, however, offset by an addition of 10 fracs in the Niobrara and five fracs in the Bakken regions. Further to the identified frac jobs, Rystad estimate an additional 28 jobs in the Permian, eight in the Eagle Ford, and 14 in other basins for January 2021.
The weekly job count in major oil regions other than the Permian – the Eagle Ford, Bakken, Niobrara and Anadarko combined – hovered around 40 jobs per week in September and October, but the run rate of activity increased to 60 jobs per week in November, due to the unusual spike in activity in early November in the Niobrara region.
This is an abridged version of an article originally published in Issue 1 2021 of Oilfield Technology magazine. To read the full article, follow the link to the issue and turn to page 10: https://bit.ly/3cAmyDU. And to sign up to receive a free regular digital copy of the magazine, follow this link: https://www.oilfieldtechnology.com/magazine/oilfield-technology/register/
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