Wells not completed while oil prices are low might foreshorten recovery of North American drilling, even if the upturn arrives sooner than expected, analysts warn.
A drilling slump outrunning most forecasts has evoked predictions of a prompt production decline able to help correct an oversupplied oil market (OGJ Online, Mar. 12, 2015).
But James Crandall and Mar Bianchi of Cowen & Co., acknowledging in a research note that the first-quarter US rig count is “falling even more quickly than our forecast had assumed,” think recovery might be short-lived.
They expect the rig count by the quarter’s end to fall below 1,100, of which about 1,050 will be land units. Predicting that drilling will reach bottom at 950-1,000 for all rigs by early in the third quarter, they say recovery could begin by the fourth quarter, lifting the rig count by perhaps 150.
But here’s their warning: “Certain companies have advertised a large inventory of drilled but uncompleted wells, and production coming on from this source as well as production from increased drilling along with the seasonal issues in the business may cause a retracement of a piece of the fourth-quarter gain.
“We continue our view that a sustained pick-up in the North American land business is not likely until the third quarter of 2016.”
