Flowers Consulting Blog
After the North American rig count hit bottom in May 2016, the number of oil and gas rigs has steadily been enjoying an increase. At its lowest point the North American rig count dipped to 404 rigs. That's a historical low never seen since the rig count statistics started being taken. The good news is that today the rig count has climbed to 729 rigs in North America. Sustaining this increase is of course the price of oil which is holding steady at 55 dollars per barrel of WTI.
These are welcome signs as we start 2017 but not an 'all clear signal' to be sure.
The basic indicators are not solid in that the main oil producing nations have agreed to curtail production subject to quotas. Market fundamentals are not at play here but rather an agreement amongst countries that have to ensure that their domestic constituencies are acquiescent.
The aftermath of the sustained downturn has seen many smaller operators going bankrupt. Only the bigger operators and service companies remain ready to enjoy the upturn in activity. According to the Houston Chronicle even Weatherford 'idled' its fracking business this past week.
The other major effect of the past 2 years has been the efficiency gains by the remaining companies in the sector. Worldwide oil and gas operations are now being run extremely efficiently as a result of this 'new normal' in the industry.
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