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Permalink Reply by Skip Peel - Mineral Consultant on March 26, 2020 at 5:02

Louisiana rig count is remaining stable so far.  See my main page discussion - HAYNESVILLE RIG COUNT BY PARISH/COUNTY AND OPERATOR (3/20/20).  I update it each week so the members can track Haynesville/Bossier directed rigs in LA and E TX.  Operating companies have rigs under contract and there is a penalty to drop a rig prior to the contract expiration.  Some drilling must continue to maintain cash flow and service debt obligations.  I'm unsure if the state will provide permit term extensions.  Many of the companies that I follow have been moving from six month permits to twelve month permits.  An indication of building some flexibility into their drilling schedules.  Anticipating some uncertainties in projecting how the current situations will play out.

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Permalink Reply by Greg Whitson on March 26, 2020 at 5:43

I do follow your rig count discussion and appreciate it.  I just wanted clarification that those rigs are still actively working.  I'm not an expert in the industry so I didn't know if that was an active rig count or a count of rigs on location that might not be active at this time due to the shelter at home state orders..

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Permalink Reply by Skip Peel - Mineral Consultant on March 26, 2020 at 6:09

Rigs represented in the weekly rig report are rigging up, drilling ahead, running logs, taking cores, setting casing or waiting on orders.  None are stacked or not involved with some element of drilling a well.  The report is generated not by the operating company but by the drilling contractor as a means to give driving directions to the rig site for delivery of materials and services.  When a rig contract expires or is cancelled, the rig goes to a yard to be stacked until a new contract comes along.  It doesn't stay on the well pad.

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Permalink Reply by Skip Peel - Mineral Consultant on March 26, 2020 at 6:37

One of our more prominent lurking members wishes me to remind everyone that the O&G industry is classed as "essential" so that there are no restrictions on daily operations in the field.  We hope all those drilling or supporting the drilling take care.

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Permalink Reply by Henry on March 26, 2020 at 22:59

I saw Scott Sheffield on CNBC's Fast Money yesterday.  He is the president of Pioneer Natural Resources, one of the best run of the independents.  He painted an incredibly bleak forecast for the independents.  Aside from Russia and Saudi Arabia, he called out the majors, especially XOM as major threats (no pun intenede) to the independents.  I guess XOM is waiting to pick up acreage as these companies go bankrupt?  His said there are currently something like 75 independents today.  If nothing changes, he says that by the end of 2021, only about 10 will be viable.  The remainders will be zombie companies - companies whose debt is too high to merge with anyone.  He said (his words, not mine) that they will all be like Chesapeake.  Ouch.  This was an eye opener for me.

Back to isolating....

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Permalink Reply by Skip Peel - Mineral Consultant on March 27, 2020 at 1:17

The zombie companies existed pre-virus and pre-oil price war.  Of the mid-majors (independents) there are only about a dozen that deserve to survive.  The rest need to go, the sooner the better for the industry.  Short of bankruptcy or a merger, the zombie independents will continue the ridiculous supply glut which is weighing on the profitability of all O&G companies, even the majors and super-majors.  The zombies have under performed for so long that even private equity will not lend to them anymore.  The credit markets are closed and no one needs to "bailout" the walking dead.  I have no sympathy for the c-suite managers of those companies, only for their employees. 

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Permalink Reply by Jesse Joyner on March 27, 2020 at 2:46

"Zombies of the Apocalypse." I read a news article that said the U.S. was reaching out to the Saudis and asking them to cutback their release of oil due to our national emergency. I assume the same type of diplomacy is also going out to the Russian oligarchs. Being a betting man that's won my share of friendly poker games, I'd put my money on the Saudis turning down their spigots. And, of course, Russia might also kiss up, too. It's not the new normal. It's the new abnormal.  

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Permalink Reply by Skip Peel - Mineral Consultant on March 27, 2020 at 2:53

I think both the Saudis and the Russians are desirous of higher crude prices.  The best way for them to accomplish that long term is to kill off the US oil zombies.  It's mostly a supply vs demand question however both countries want to guard their market share also.

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Permalink Reply by Ben on April 1, 2020 at 11:25

What’s the rig count in the LA portion of the HS? How many rigs are we expected to lose because of the plummeting gas prices?? Skip, Jay, Henry?? Thoughts?

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Permalink Reply by Skip Peel - Mineral Consultant on April 1, 2020 at 11:32

Check my main page discussion for the rig report from 3/27.  I'll post an updated one next Friday.  Most of the news regarding the decreasing rig count is for oily basins although the last report did show a meaningful drop for Haynesville directed rigs in E TX.

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Permalink Reply by Jesse Joyner on April 2, 2020 at 5:52

Yup. Oil surges per Saudis pulling production off the market. The new abnormal.

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Permalink Reply by Jesse Joyner on April 2, 2020 at 9:33

And talk of U.S. putting a tariff on Saudi oil imports.

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