Raymond James Energy Stat of the Week
by J. Marshall Adkins
Energy Stat: What Are U.S. Drilling Permits Telling Us About Future U.S. Rig Activity?
December 15, 2014
Since there hasn't been enough bad news for energy stocks lately, last week's headlines touting a 40% decline in new drilling permits issued in the U.S. provided just one more sensational reason to sell oil and gas stocks. While few now doubt that steep declines in U.S. drilling activity lie ahead, the magnitude of the drilling permit fall-off was disconcerting. After digging a little deeper into the permit data, it quickly became apparent that the 40% decline headline number was indeed very misleading. The chart that follows shows that, on average, U.S. drilling permits usually decline about 30% seasonally every week of Thanksgiving! In this week's Stat, we will discuss the usefulness of drilling permit data for predicting near-term U.S. rig count trends, additional considerations that need to be made when looking at November's drilling permit decline specifically, and drilling permits as an indicator of the magnitude of drilling activity movements in general.
This is a summary of a much more detailed commentary. Please contact your financial advisor for the full report.
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