Raymond James: D&C Budgets slashed to the bone

[dan_s]

There is no sugar coating it, U.S. oilfield activity will collapse with oil prices well below $30 WTI.

Initial E&P upstream spending budgets have indicated activity will be down ~35% from previously announced levels, or down 45% when compared to 2019 budgets. However, the declines will be far more dramatic than these initial cuts and we stress that these announcements skew towards larger cap, better hedged and capitalized operators. Total U.S. capex is likely to fall in excess of 65% with a WTI price persisting in the $20s.

Many of the budgets were released with oil prices significantly higher than they are today, and we would not be surprised to see further revisions downward. As such, oilfield service activities are set to decline at a never before seen pace, and we believe the U.S. oil service market has become a test of survivability, not profitability. In this week's stat, we will detail our forecasts for U.S. drilling and completions activity based on current expectations, as well as provide our updated tracker of E&P capex announcements. Due to the volatility in oil prices, we have prepared two separate scenarios that frame the both high and low oil price seen over the previous two weeks. We believe OFS companies and investors need to prepare themselves for activity to fall at an unprecedented rate.
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It usually takes about three months for declines in drilling activity to show up, but this it might be sooner because several companies have stopped all well completions. That would be my advice to every upstream company that I follow.