Do Rig Counts Tell Us Everything We Need to Know? – Part 5October 12, 2021
Oil industry business cycles are unavoidable – but, no two are alike. However, this recovery, way slower than the rate of recovery in oil prices, has stalled. Look at this graph of rig counts for Reeves County and the Delaware since early ’20. Compared to all other recoveries, when the price of oil rebounds as sharply as indicated in this graph, the drilling rig counts would also zoom up. This is an outlier situation.
But drilling permits are starting to (finally!) show real signs of a recovery. This is the first genuine signal that the operators are responding to oil prices that are irresistibly high!
The bottom line is that permits are an irrefutable leading indicator of operating activity. The ramp-up may be just around the corner. However, the stock of small and medium-sized industrial/warehouse buildings (under 10,000 sf) in Pecos is very limited; but First Keystone has them to rent or for sale. Act now to avoid the coming bottleneck!
The “I” WordOctober 7, 2021
As we last reported, this “recovery… …displays its own unique facets. It is way slower than the rate of recovery in oil prices would imply”. The downside of this slow uptick is now rearing its ugly head – INFLATION! Yeow! The “I” word!
Well, it is inevitable: If the supply side cannot ramp up – for reasons due to Covid, labor shortages, scarce capital, too much risk, logistics or whatever – then, as the operators finally react to the very favorable price points for crude oil, the supply side is unable to ramp up in response to an upsurge in drilling and completions. That’s happening in many places. Take Oklahoma’s Anadarko Basin, for example. It got hit really hard with The Pandemic Recession – much harder than the Permian. The supply side was idled and skilled workers scattered. The core of the labor force was gutted. Now that operators – big and small – are trying to drill new wells for exploratory or developmental reasons, the service industry isn’t there to deliver. Shortages, lead times, work quality, and price quotes – all bad.
First Keystone saw this coming and we are trying to be part of the solution! We’re getting ready to deliver our first industrial building for lease in Pecos in two years! It is our entry-level Bobcat product which is a 3,750 sf office/warehouse with a one-acre fenced lot. This industrial building for lease is available now. Those suppliers looking to be able to respond should act now on this opportunity to rent an industrial building.