The Shale Industry Is Dropping Drilling Rigs, Fast

livemint.com:

The shale patch is shedding rigs at the fastest pace since the height of the Covid-19 pandemic despite healthy oil prices. Behind the drop in rigs is a tale of the haves and the have-nots. Private companies, which added rigs at a breakneck pace as the pandemic abated, have drilled up many of their best remaining wells, forcing them to decelerate.

Meanwhile, their larger, public brethren aren’t tweaking their drilling programs as they sit on larger inventories of premium, undrilled wells. The number of rigs drilling for oil and gas has dropped to about 670 from around 800 at the beginning of the year, with private drillers accounting for roughly 70% of the decrease, according to David Deckelbaum, an analyst at investment bank TD Cowen. The slowdown augurs tepid U.S.

crude-production growth for the rest of the year, analysts said. Even though larger public companies mostly aren’t shedding oil rigs, they aren’t growing rapidly either, as they adhere to investors’ desire for capital restraint. The Energy Information Administration expects domestic growth output to increase by fewer than 300,000 barrels a day in 2024 from this year.

Taylor Sell, chief executive of Element Petroleum, said the company’s break-even—or the price needed to fund drilling without a loss—had increased by between $5 and $10 to reach between $55 and $60 a barrel, in part because the cost of materials such as steel pipes remains high, at roughly 40% more than 18 months ago, he said. Element last December dropped its only active rig as the company sought to save its best wells for more auspicious times or for a potential buyer, Sell said. “We are not drilling right now to protect inventory," he said, adding that the company would put a new rig to work