Any seasoned professional involved in upstream oil & gas activities knows the importance of rig counts. Of course, the utility of this indicator has shifted over the years as the definition of a rig itself has undergone a metamorphosis; nevertheless, it remains a solid barometer that indicates levels of exploration and development.
Certainly in the Delaware, rig counts correlated with the dramatic emergence of this province as being an elite sector for oil & gas growth in the US. The graph below charts the percentage gains since November 2015 of the Delaware versus the rest of the US. It shows that the Delaware doubled in this period, while the country is effectively flat.
The Delaware is part of the famous Permian Basin. The Permian also outpaced the United States, but not at quite the same blitzkrieg rate. It is up “only” 80% in that time frame.
Interestingly, as the US itself has slowly peeled back by 21% since the beginning of 2019, the Delaware has also tracked it. The Delaware continues to surge in production even though its rig count is down by a more modest 15%. A key explanation is that the wells that are being completed are high-quality and the aggregate volume levels keep cumulating. This phenomenon does not persist in lower quality oil basins.
So, what’s going on? Stay tuned, we will have more to say in our March Report.
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