Raymond James Energy Stat of the Week
by J. Marshall Adkins
Energy Stat: U.S. Rig Count - When Will It Bottom and Is There Anything to Get Excited About?
April 13, 2015
The total U.S. rig count decline has been more precipitous than anybody would have imagined. Less than three months ago, we had forecasted the rig count would fall by 850 rigs from peak to trough, bottoming out in late 2015. At the time, that lower activity outlook was significantly below consensus. Since then, the U.S. rig count decline has already surpassed our full expectations in just three months! As of last Friday, the total U.S. rig count (as measured by Baker Hughes) stood at 988 rigs, down 943 rigs from the September peak. While the brunt of the pain has already been felt, we expect the U.S. oilfield activity declines to continue through May before gradually improving in the back half of 2015. All in, we now think that the total U.S. rig count will decrease by about 1,000 total rigs (~52%) peak to trough (from 1,931 rigs to 930 rigs) or an average annual decline of 787 rigs (~42% y/y ). This updated 2015 average total U.S. rig count estimate is 19% lower than our prior published estimate. In 2016, we expect the average total U.S. rig count will increase by 10% (or 106 rigs) y/y. We expect the horizontal U.S. rig count to hold up relatively better, falling ~37% (or 467 rigs) y/y in 2015. As we look forward to 2016, we expect the horizontal U.S. rig count to be up ~13% (or 103 rigs) on average, modestly outpacing the recovery in the total U.S. rig count. In today's Stat of the Week we will lay out our detailed assumptions underlying our rig count expectations over the next five years, as well as our longer term activity outlook detailing how the rebound might look.
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