As you can see on Slide 3, U.S. blended NGL prices are down 34% from the beginning of the year and 22% since April. This further erodes operators' cash flows and decreases drilling budgets. We see these same forces at work in Canada but not yet as impactful.
The upper section of Slide 4 shows the Baker Hughes U.S. land rig count over recent cycles and, in the lower section, from its peak in mid-November to last week. Since the peak in November, we have seen a decline of 108 U.S. land rigs, 30 of which have occurred in just the last 2 weeks. This, coupled with recent customer conversations and competitive data points, support the lower end of our expectations.
Let me make clear, we do not yet foresee a sharp downturn but rather a moderate drop in rig count exacerbated by competitors offering uncontracted, newly built and existing rigs at lower rates and shorter terms in order to secure work. This is similar to the situation that played out earlier in the year with regard to Pressure Pumping, but we expect the extent of land rig oversupply to be much less.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV