US exploration and production budgets are expanding for the first time since 2014, Fitch Ratings said, adding that its analysts expect higher US rig counts along with increased drilling and completion spending in 2017 compared with 2016.
“Capital allocation is expected to be weighted toward the highest-return shale plays with growth potential such as the Permian, Eagle Ford, STACK, Haynesville, and Marcellus basins,” Fitch said.
Growing production, higher oil and gas prices, and leaner cost structures should lead to increased cash flows for producers, analysts said.
Fitch forecast average US Lower 48 land rig counts will increase 60-65% year-over-year, with the pace of rig additions moderating following this year’s first quarter.
“This translates into a US Lower 48 land rig count averaging around 800 rigs in 2017, with rig counts growing to about 850-875 rigs by yearend 2017,” Fitch said.
The rating agency believes the rate of US rig count growth in future years will be much more limited.
