US land drillers see improving activity in 2021 as E&Ps expand operating spheres - S&P Global

cicingwos.blogspot.com

Houston — US land drillers' rig counts are continuing to inch forward, and exploration and production companies are enjoying lower costs as they reap the benefits of efficiency improvements, with increasing activity projected for 2021, top executives said in Q1 earnings calls April 29.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

"Crude oil prices trading in a tight band around $60 [per barrel] have been supportive of increasing activity," Andy Hendricks, CEO of Patterson-UTI, said. "And looking forward, based on conversations with customers, we now have greater confidence in further improvement in drilling and completion activity."

Hendricks added the company sees 2021 "as a year of steadily increasing activity, driven initially by private and agile public operators and then by major operators, and we are encouraged by the opportunities that we are hearing from our customers for Patterson-UTI."

RELATED: US oil, gas rig count climbs 8 to 538, gas rigs hit 1-year high: Enverus

Patterson-UTI expects its rig count will reach roughly 80 rigs over the next three months, Hendricks said, with most of the growth coming in late June and early July.

The driller's rig count stood at 123 in Q1 2020 but fell after oil demand and prices plummeted as the pandemic spread around the globe.

Also, pricing on most of the driller's active rigs has been reset since late Q1 2020, he said.

While Hendricks expects more interest by larger E&Ps in adding rigs this year, Nabors CEO Anthony Petrello sees the opposite.

A survey of its largest Lower 48 clients, which accounts for approximately 40% of the working rate count, shows "flattish activity planned for the balance of 2021. Smaller and medium-sized operators are responding faster to the recent strength in commodity prices."

The Lower 48 rig count has risen 197 rigs, or 87%, since its August low, Petrello noted.

Based on his company's conversations with clients, "we expect Nabors' rig count to increase each quarter through the balance of 2021 [and] see pricing traction in the second half of the year," he said.

E&P costs continue to fall

In their Q1 calls, top executives at Ovintiv and Continental said their costs continue to decrease thanks to ongoing improvements in well completions, reduced days needed to drill wells and other efficiencies.

For Ovintiv's three main assets—Oklahoma, the Permian Basin of West Texas/New Mexico and Montney in western Canada—combined costs declined 12% in 2021 so far in 2021 from last year's average, Gregory Dean Givens, the company's executive vice president and chief operating officer, said.

Also, Ovintiv has exclusive rights to the Howard County, Texas, wet sand facility in Q1; a low-cost, low-risk source of sand for hydraulic well fracturing in the Permian. The facility enables lower completion costs by $100,000/well in the basin, Givens said. Sourcing local wet sand also reduces CO2 emissions by about 200 tons/well and reduces yearly truck mileage in Howard County around 80%, he added.

"We all know silica dust is a concern in the industry," Ovintiv CEO Doug Suttles said. "When we use wet sand, we actually have no silica dust."

Suttles said his company will be more active in the Oklahoma basin this year, particularly in the SCOOP play, where costs are coming down and wells are becoming more economic.

"We are continuing to unlock new locations, which is encouraging," he said. "It wasn't very long ago when SCOOP wells were $10 million, $12 million, $13 million [apiece]," although they are currently $5.2 million.

In Q1, Ovintiv produced 538,300 boe/d, down 4% from the same 2020 quarter.

Continental to run 2 Powder River rigs

Well costs for Continental are also trending lower, from structural improvements and enhanced operations designs, CEO Bill Berry said.

In its core Bakken Shale operation in North Dakota, well costs are targeted 7% below 2020 at $641 per lateral foot. That savings, plus consistent year-over-year performance from Bakken wells, are expected to deliver a 70%-plus return rate at $60/b oil prices and $2.75/Mcf natural gas prices, Berry said.

Even though a federal judge still must decide in May whether to temporarily shut the 570,000 b/d Dakota Access pipeline, Continental's "anticipated base case is that the pipeline is going to continue to flow," Berry said.

The pipeline, which is the Bakken's primary crude oil artery, moves barrels to Illinois and from there south to Texas.

Berry noted the company has " put in place some plans and has the ability to move all our oil out of the Bakken with some of the [actions] we've done already."

In Oklahoma, which in 2020 was more gas-weighted for Continental based on fundamentals, this year supports more oil-weighted drilling for the company.

In the Powder River Basin, where Continental bought assets in March from Samson Resources for $215 million, the company will put two rigs to work.

Its first well will spud by the end of April or very early May, with the second rig set to begin drilling in June, Berry said. Continental has said its primary targets will be the Shannon, Frontier and Niobrara reservoirs.

Continental's entry into the basin added 9,000 boe/d of production (80% oil) across 130,000 net acres and 400 million boe of resource potential to the company's inventory.

The company in Q1 produced 308,000 boe/d, down 15% from the year-ago quarter.

Let's block ads! (Why?)

"activity" - Google News
April 30, 2021 at 03:49AM
https://ift.tt/3t2YYor

US land drillers see improving activity in 2021 as E&Ps expand operating spheres - S&P Global
"activity" - Google News
https://ift.tt/3ddCXMh
https://ift.tt/2WkO13c

Bagikan Berita Ini