Press release

Another bearish surprise appears far behind the US land rig count

December 1, 2015
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A comment by Per Magnus Nysveen, Head of Analysis

As total US land rig counts takes a new dip, investors again see light in the end of the tunnel for oil markets. We find global oil prices should soon rebound sharply, but likely not before another significant dip for the WTI benchmark through December and January.

The explanation lies deeply underneath the rig count statistics, in data that are far more opaque to investors and traders. Whereas production typically comes 6-9 months after drilling a well, first oil is flowing just a few weeks after a well has been fracked by the crews managing the hydraulic pressure pumping.

Fracking activity has moved in the opposite direction than rig counts over the last six months. “Frack counts” for US shale wells have increased by 25% from May to October (Figure 1 Source: NASWellData). In the Eagle Ford shale of South Texas, the six leading operators stepped up from 250 wells fracked in the second quarter, to 325 wells fracked in the third quarter, led by Marathon, Anadarko, BHP Billiton and EOG (Figure 2 Source: Rystad Shale Dashboard on Bloomberg Terminal based on NASWellData).


This has taken down the US inventory of drilled uncompleted shale wells from a peak close to 5,000 and down below 3,500 by year-end. Such low level of shale wells inventory has not been observed since the summer of 2013, while this still amounts to six months of drilling activity, vs four months in 2013.

During the same six months, shale wells’ 1st month base decline has fallen from an aggregate of 350,000 barrels per day to 250,000 barrels per day, and each new well now adds 410 bbld  of crude oil, compared with 370 bbld a year ago. This implies the November count of new wells on-stream appears perfectly aligned with the minimum needed to maintain US production flat month by month.

As most analysts rely on EIA’s short-term energy outlook, we expect markets will yet another time be surprised by the resiliency of US shale oil. In this cycle, as shown by the latest Rystad Energy Global Oil Market Trends Report, we believe the ultimate price floor for global oil markets is coming from another source of supply than US shale oil:  Starting from the fourth quarter, we expect offshore mature fields  to decline by 1-1,5 million barrels per day over the next 12 months, or about twice the historically observed decline rate, due to severe underinvestment in drilling on mature offshore fields that is needed to combat natural decline of old wells.


Article Contacts

Per Magnus Nysveen
Phone: +47 24 00 42 16

Julia Weiss, VP Marketing
Phone: +47 48 29 87 61

About Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.

Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in Norway (Stavanger), the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), Africa as well as South East Asia.

About the Global Oil Market Trends Report

The Global Oil Market Trends Report (OMTReport) reveals Rystad Energy’s demand forecast against its bottom-up, field-by-field supply forecast. It includes our market view for oil price direction & forward curve development, explaining market fundamentals, global S&D history and outlook, cost of supply curves, and regional variations.

About NASWellData (North American Shale Well Data)

NASWellData provides historical well production and completion data derived from state authorities, with complete US shale
coverage. NASWellData includes the following components: (1) general well attributes (well name, operator, county, lease, location, target formation, field, wellbore direction), (2) monthly production rates at well level, (3) reported and calculated initial production rates, (4) well configuration parameters (stimulation stages, TVD, TMD, proppant use, fracturing liquid volume), (5) important dates in well life-cycle (permit approval, spud, completion, start-up, last production), and (6) an embedded tool for well curve analysis along with a vast collection of Rystad Energy’s hyperbolic curves for US shale acreage positions.