The Shale Daily Update – 6.24.2020

The number of active frac spreads continues to steadily rise. After reaching a bottom of 45 in early May, the Primary Vision count now stands at 78.
The oil pump, industrial equipment

What You Should Know About Oil and Gas Today

The State of Play

The number of active frac spreads in the U.S. continues to steadily rise. After reaching a bottom of 45 in early May, the Primary Vision count now stands at 78. While that is still off by 76% from the 335 active on January 1, it does represent some progress, a sign of an industry slowly recovering from the depths of the bust.

With rig counts holding steady at all-time lows – the Enverus Daily Rig Count sits at 295 today – the indication is that companies continue to bring in new frac spreads to try to work down their inventories of “drilled but not complete”, or DUC wells in response to the somewhat healthier, though still too low, price levels achieved during June.

The price for West Texas Intermediate was down somewhat this morning, trading at just below $40 per barrel as of this writing. The drop is in response to the API crude inventory report showing a build of 1.75 million barrels last week, but there does not appear to be any real foundation for any long-term bearish sentiment in the markets right now.

On to other news…

The bust isn’t limited to U.S. shale. Reuters has an interesting report this morning detailing the fallout taking place in the global offshore industry as a result of the COVID-19 pandemic. Of special note is this passage:

The offshore services business is the worst performing of the oilfield services sector, with shares of the 10 largest publicly traded down 77% since the start of the year.

Four of the seven largest offshore drillers – Diamond Offshore Drilling Inc DOFSQ.PK, Noble Corp (NE.N), Seadrill Ltd SDRL.N and Valaris Plc (VAL.N) – have sought protection from creditors or begun debt restructuring talks that could lead to bankruptcy.

Yikes.

We have seen this headline many times before. The Wall Street Journal has a new iteration on the theme that “Green Energy Is Finally Going Mainstream” today. If you can make yourself read past the tired, chiche’ first line – “After many false dawns, the sun is finally starting to shine on green-energy bets” – you see essentially the same booster-type story around renewables finally being competitive and attractive to investors we’ve read 100 times before over the last 30 years. Only this time, all the Unicorns are real. *sigh*

With its long-predicted bankruptcy filing still having failed to come about, Chesapeake Energy is now getting a bit of a lifeline from the federal government. The BLM is allowing Chesapeake to suspend production in more than 100 wells on federal leases without risking losing ownership rights that would normally apply. That’s certainly no panacea for the company’s well-publicized financial problems, but every little bit helps.

Colorado Governor Jared Polis named 5 new “professional” members of the Colorado Oil and Gas Conservation Commission on Tuesday. They include 3 holdovers from the current commission, and 2 environmentalists who will no doubt do whatever they can to further inhibit oil and gas production in the state. They will all make princely salaries while they’re doing it. What a deal.

Texas Senator John Cornyn wants to get re-elected, so he is moving legislation to modestly help the oil and gas industry that he pretty much ignores about 95% of the time. Cornyn’s bill – which has basically zero chance of becoming law in the current congress – would provide some temporary tax and royalty breaks for the industry.

Ok, that’s enough for today. It’s all I can take.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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