U.S. rig numbers at have fallen to their lowest since February 2018. According to Baker Hughes figures, rig numbers have fallen from 1,054 in September 2018 to just 860 this month (Sept. 28 2019). Continued gains in productivity have caused record production of oil and gas, falling prices and a year-long decline in drilling and well completions. Likewise, the share prices of producers and field service companies have fallen. For example, leading shale producer Exxon’s shares are down to $71 a share compared with $85 a year ago. Similarly, oilfield services companies have suffered with National-Oilwell Varco’s shares almost halving from $42 a share a year ago to just $22 today.
A combination of factors is responsible for the decline in U.S. rig activity. Chief amongst which, thanks to new technology and increased industry productivity, is the fall and low price of crude, constricted offtake pipeline capacity to Gulf refineries and ports as well as investor sentiment and market demand.
Since September 2018, crude prices have fallen from $75 per barrel to just $55 today. Advances in technology and methods have improved productivity and cut costs. For example, instead of using several separate drilling rigs to exploit reserves, frackers are taking an industrial approach to drilling, using one drilling rig to drill multiple wells from the same location. With horizontal drilling technology, a rig can target oil up to a few miles away. Nonetheless, producers’ margins have been squeezed.