Saturday, January 9, 2021

Rigs Matter -- January 9, 2021

Link here

I've long lost the bubble on this one -- the importance of drilling for Saudi Arabia, i.e., the importance of the number of active rigs for Saudi Arabia. I remember a lot of interesting posts some years ago regarding how important it was for Saudi Arabia to keep drilling.

But wow. Look at the timing. I don't think one can cut the number of rigs by this degree overnight without a bit of planning and that doesn't even take into effect the time to physically bring down the rigs. Link here

Interestingly enough the mainstream media posts this data after Saudi Arabia "surprises" everyone by agreeing to cut production. Prince MBS played the mainstream media like a fiddle.

This next year, July, 2021 - June 2022, could be particularly interesting for those watching global drilling. 

There's a huge difference among the Supermajors, the NOCs and US shale producers. See this post

Back to the Bakken:

Saudi Arabia does not have DUCs. A well drilled is a well completed. I don't know the rules in the Permian, but I assume they are similar to those in the Bakken. In the Bakken, oil operators are allowed two years to complete a well after it has been spud. And even then, waivers can be granted to extend that two-year deadline.  

In the Bakken (this does not include any Permian data):

DUCs tag.

Inactive wells in North Dakota.

In the last quarter of the year, 4Q20, the number of wells reported as completed. Many of these wells in fact were still carried as "not completed":

43 for the month (December, 2020); 99 for the quarter (Oct - Dec, 2020), 764 for the year (calendar year 2020).

Number of wells in North Dakota that are off-line for operational reasons, most recent data, October, 2020:

  • DUCs: 724
  • completed, but inactive: 2,934
  • total off line for operational reasons: 3,658
  • producing: 15,512
  • total off line for operational reasons (most recent data) / number of wells reported as completed (CY2020): 3,658 / 764 = 4.79, rounded = five years inventory; this is a combination of:
    • new wells that will set IP records:
    • new wells that will not set records but will be incredible wells, nonetheless
    • new wells that are "average"
    • good wells that can be better through asset management
    • good wells that need to be re-fracked with small re-fracks
    • good wells that need to be re-fracked with large re-fracks
    • all wells off line but not scheduled to be abandoned that need to be re-fracked 
    • lousy wells that will never get better; many will be permanently abandoned


  1. They tend to do 2-3 year contracts, often on the calendar year. Thus not surprising to see a big change show in JAN. It's really based on decisions a half year ago to let several contracts lapse.

    Also, they only seem to need 3-60 rigs to do 10 MM bopd. I'd say that is pretty good. US needs needs 400+ to do the same.

    1. Thank you. I appreciate that. What surprised me was that Saudi seemed to telegraph their intentions some time ago. On another note, one wonders to what degree "money in the bank" affected their decision. If they can produce as much oil as they need to produce to meet demand but with fewer rigs, a smart move.

    2. Interesting about 2 - 3 year contracts. Doesn't give them a lot of quarter-to-quarter flexibility. I know the shale producers have a yearly CAPEX plan but my hunch is they watch quarter-to-quarter very closely whether to add a rig or not.

  2. ack in the wild Bakken days of 2008/09 when Crude prices whipsawed back and forth then down, Fidelity Exp. ( the MDU oil unit ) paid a big chunk of Money to buy out a drilling contract they had in effect. don

    1. Interesting. Thank you. My hunch: operators are a lot smarter these days.

    2. It's not smarts per se. Just risk and luck. You can go spot and have it work out, when prices drop. But you look stupid if service costs skyrocket and you're not locked in.

      It's a lot like hedging. There is no "free money". You take a bet and take a risk. You can go wrong either way.

      Oh...and buyibng out contracts is a very normal risk (drilling, midstream, etc.) Just like having to abondon leases and never drill them. Happens every bust. Just another normal risk of doing business. Not a "smarts" issue.

    3. As the dude would say, "that's just like your opinion, man."