Oil prices will continue to be the primary catalyst determining U.S. rig demand in the months ahead, according to a forecast released by Platts RigData. The U.S. Land Rig Three-Year Forecast, now in its second year, is an analysis of the key drivers of domestic oil and gas supplies and what they imply for the next three years’ land rig demand.
“OPEC’s latest agreement to modestly reduce production, a move aimed at supporting the price of crude oil globally, reinforces our expectations of strengthened U.S. rig counts next year,” said Trey Cowan, senior industry analyst, Platts RigData, a unit of S&P Global Platts, based in Houston, Texas.
Specifically, Platts RigData projects the U.S. rig count will grow by an average of 131 rigs or 29% year over year during 2017. This would be an increase from the average estimated 449 rigs actively drilling in 2016.
Forecast highlights include:
- Oil prices to trend higher as incremental U.S. supply levels normalize
- Oilfield service activity to continue the recovery begun in May
- Elevated production derived from “high grading” (where operators focus on developing the highest returning wells) has entered the latter stages for this recovery cycle
- Lower incremental-production volumes per well are likely
- Despite recent drawdowns in drilled-but-uncompleted (DUCs) wells, oil and natural gas supply unlikely to expand as rapidly as first signaled
“In our opinion, the expected smaller incremental-well production volumes would imply the need for a greater number of wells to be brought into production in order to reach targeted production goals,” said Cowan. “To this end, Platts RigData expects more than 11,000 U.S. oil & gas wells to be drilled during 2017. That would be an improvement of 25% year over year versus our 8,900 well spud estimate for 2016.”
Key components of the forecast:
- Regional projections of a base case plus a downside and upside growth case
- Regional summaries of developments, commodity prices, and operators’ drilling sentiments
- Assessment of macroeconomics
- Outlook for technology advancements, effects of rig fleet age, and financial health of large service providers
- DUCs inventory overhang and outlook
The 2016 edition of the Platts RigData U.S. Land Rig Three-Year Forecast is available in print and PDF format, including an Excel workbook with all supporting data. For more information or to subscribe to the Forecast, visit http://rigdata.com/us-land-rig-three-year-forecast.
S&P Global Platts acquired RigData, a provider of daily information on rig activity for the natural gas and oil markets across North America, on June 1, 2016.
S&P Global Platts provides information and benchmark prices for the commodities and energy markets. S&P Global Platts’ coverage includes oil and gas, power, petrochemicals, metals, agriculture and shipping.