Upstream Companies are slashing drilling budgets - Mar 20

[dan_s]

It now looks like up to 50% of the drilling rigs active today will be stacked in a yard within a month or two. Some companies have already halted well completions, which is very smart. Most horizontal wells come on very strong and produce a lot of oil & gas in the first six months. Therefore, it is not wise to complete them when commodity prices are low. At this point, I think U.S. oil production will decline by AT LEAST a million barrels per day from December, 2019 to December, 2020. As you know, December production was lower than November and it is normal for oil production to decline in Q1.

Notes from Stifel:

Centennial Resource Development, Inc. (CDEV, $0.45, Buy; Target $6.10)
Centennial announces 50% capital budget reduction plan to protect its balance sheet - Derrick Whitfield

After the close, Centennial announced it reduced its operated rig program from five rigs at the beginning of the month to one currently. Assuming a one-rig program for the remainder of 2020, the company expects a 50% reduction from its original 2020 capital guidance, resulting in a new budget of ~$295-345 million. Management also entered into fixed-price swaps to protect against near-term declines in oil price (25,500 mbopd at $26.08/bbl). Centennial intends to provide detailed guidance during Q120 earnings.
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Rosehill Resources Inc. (ROSE, $0.46, Hold; Target $0.42)
Fully Hedged and Halting Activity - Michael S. Scialla

After yesterday's market close, ROSE announced it has halted all activity for 2020 after drilling and completing 8 wells YTD. Stress testing the balance sheet at $35 WTI through YE21 suggests debt metrics remain strong although oil production would decline 28% next year, by our estimates. The hedge book, which now covers the vast majority of our 2020/2021 estimated oil production, reduces downside risk to our FCF estimates over the next two years.

[dan_s]

From Spears, an oil industry consulting group:

"4 quarters ago Halliburton by itself had quarterly frac sales of $2 billion. Today the GLOBAL frac market is SMALLER than that.

News from the field this week suggests US frac activity is falling at least 50% right now, perhaps more. And THAT canary in the coal mine suggests drilling rig activity will collapse hard as soon as current pads reach TD on the last well."