US Oil Rig Count Rises For 23rd Straight Week But High Costs Drive Investors Out Of The Permian
The number of oil rigs in America has now risen for 23 straight weeks (and 50 of the last 52 weeks), up 11 to 758 in the last week – the highest since April 2015. “It’s becoming bearish mania,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. “If we keep going down, we’re not going to be adding rigs in a few months, we’re not going to be adding production”
And we suspect, given the lagged reaction to prices, that inflection point in rig counts is close…
And the last chance for the week for the bulls just left…
US crude production (in the Lower 48) has been on a tear (with one brief interruption) tracking the lagged rise in rig counts almost perfectly…
And the rising rig count has been driven mainly by The Permian…
But as Oil & Gas 360 notes, high acreage costs beginning to affect economics in the Delaware, driving investors away from The Permian.
The Permian has enjoyed a rush of capital since oil prices began to recover from a low of $26.21 in February of last year.
The play is home to some of the best economics in the country, making it a prime target for E&P companies looking to maximize profit in a lower price environment. But the surge in land costs is leaving little room for new investors to profit.
The Delaware basin, the Permian’s hottest zone, is beginning to become a victim of its own success. EnerCom Analytics’ well economic models indicate that the internal rates of return (IRRs) in the Delaware are now lower than those seen in the Midland due to the high cost of land.
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