Note from Raymond James - Sept 19

Note from Raymond James - Sept 19

Postby dan_s » Mon Sep 19, 2022 10:28 am

US RESEARCH PUBLISHED BY RAYMOND JAMES & ASSOCIATES

Exploration and Production
September 19, 2022

Energy Stat: How Much Core Drilling Inventory Remains?
READ MORE: https://raymondjames.bluematrix.com/links2/html/f44df36a-e7bd-4189-a1f5-d33b41db16d4

Ever since the pandemic-induced crash of 2020, U.S. drilling rig numbers have steadily increased month-over-month, owing to a rapid improvement in both oil and gas price environments. While last week’s total of ~760 rigs still pales in comparison to the highs of 2018 (~1100), this relatively modest figure reflects the recent change in public E&P business structure — from the traditional, tireless pursuit of growth towards one of responsible free cash-flow generation. Expanding further, the vast majority of public E&Ps now target maintenance mode activity targeting minimal yearly growth rates (~0-3%) and attractively low reinvestment rates (~30%), thus prioritizing shareholder returns above all else. Additionally, E&Ps have shifted focus towards “tier-1” (core) acreage development, (unsurprisingly) targeting locations that generate the highest return per-well. In conjunction with commodity prices, acreage quality remains arguably the biggest limiting factor to sustained E&P FCF generation.

However, remaining core inventory life differs largely between public and private operators. In today’s energy stat, we’ll take a deep dive into 1) Remaining core inventory by basin, 2) Historical and current rig figures per-basin and 3) Public vs private operator core inventory.
Dan Steffens
Energy Prospectus Group
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