During the second quarter 2016 earnings update, the Lower 48 independents increased their CAPEX guidance for the year by $517.65 million versus Q1 2016 earnings update. The expansion in CAPEX is mostly concentrated in increasing drilling activities by rig additions in areas like Permian, SCOOP & STACK, and Appalachia. Also, several companies decided to expand completions activities in the 2H 2016 compared to their previous plan. A rise in CAPEX guidance has led to a modest increase of about 371 MMcfe/d, or 62 Mboe/d, in production guidance for 2016 suggesting that the bulk of the rise in CAPEX is geared towards 2017 production growth.
Since the end of Q2'16 to the end of August, producers in the Lower 48 have added about 77 oil rigs and 11 gas rigs. At the end of the earnings season, about 27 different E&P companies (in Genscape's coverage universe) decided to increase their active rig counts and two companies decided to cut their active rig counts bringing the aggregate of 52 rigs being added in the 2H 2016, which is in accordance with Genscape’s rig forecast. From the end of June 2016 to December 2016, Genscape's forecast suggests an increase of about 160 oil rigs and 40 gas rigs in the Lower 48. According to Genscape's Equity Insight sample data, almost 50 percent of the 52 rigs are being added to the Permian Basin, with Pioneer Resources leading the chart with five new rigs. After the Permian, Appalachia is next up in the rig addition chart. Leading the rig scoreboard in Appalachia is Gulfport, who has decided to keep their three rigs for the rest of the year and add another one, versus initially dropping all their rigs. According to our weekly rig count numbers by company by region, at the end of June 2016, these 28 companies had an active aggregate rig count of 62 in their respective regions. With an addition of 52 rigs, the total rig count will be 114. (Source: RigData)
Even though most companies are starting to talk about adding, we do see some still dropping rigs. For example, we have seen Hess in Bakken dropping two of their four rigs. Hess said, "We plan to drop to two rigs in August and will begin to increase activity when oil prices approach $60 per barrel." Along with Hess, PDC also decided to drop one rig in DJ Basin but primarily due to improved drilling efficiency.
Genscape's Equity Insight tracks CAPEX guidance and production guidance of about 70+ E&P companies who have operations in the Lower 48. Our E&P coverage universe represents about 40 percent of the total natural gas production and 38 percent of the total crude oil production and a very large percentage of publicly traded E&P companies. In addition, Genscape's Equity Insight tracks daily volumes by company by region for 27 E&P companies and 5 Midstream companies in our coverage universe, which we continue to expand. To learn more, or request a free trial, please click here.
