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February 14, 2019
With US shale activity in 2019 beset by uncertainty, Rystad Energy identifies three trends for US light tight oil production that will have a profound impact on the evolution of the industry in 2019 and 2020:
New Mexico: Fastest growth rate in the US
New Mexico has quietly emerged as the new core area of unconventional liquid development in the US. Light tight oil production in New Mexico has increased by about 70% year-on-year, from 419,000 barrels per day (bpd) in November 2017 to 703,000 bpd in November 2018.
“This is the fastest growth rate among all major states with significant shale activity. While New Mexico was not even one of the top three states in terms of completion numbers in 2018, it left all other major states behind on average oil productivity per horizontal well,†said Rystad Energy partner Artem Abramov.
Privates and majors: The cream of the crop
Majors and private operators out-performed pure-shale E&P players in 2018. Majors achieved a staggering 64% year-on-year average production expansion as of November 2018 while private operators increased their combined unconventional output by 44% in the same period, twice as much as pure-shale public E&P managed.
When making projections for 2019, it is important to bear in mind that the typical private operator or major is unlikely to behave in the same manner as a public pure-shale E&P would.
“The recent oil price slump is likely to bring about an immediate slowdown in activity among private operators, especially eliminating those who do not have access to core acreage. On the other hand, activity among majors will not be driven by shale-related cash flow balances,†Abramov said. “We expect to see strong resiliency of activity from Chevron, ExxonMobil, Oxy and other majors regardless of degradation in shale-related cash flow balances.â€
Base decline: Steeper, faster
Base decline is the pace at which production falls if no new wells are completed.
According to Rystad Energy’s forecast, if no new wells are completed in 2019-2020, light tight oil production is projected to decline by 62%, or 4.5 million bpd.
“It is evident that without an increase in activity levels in terms of new completions, or further increases in well productivity, the pace of growth will decelerate in 2019-2020. In fact, if the activity and productivity levels seen in the fourth quarter of 2018 prevail, US light oil production will increase by less than 1.5 million bpd between 4Q 2018 and 4Q 2020. This corresponds to a 50% lower growth rate than what was achieved over 2018,†Abramov remarked.
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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