I like spreadsheets, I’m not going to lie. Maybe that makes me a little weird or uncool and sure, it’s true that I wrote a macro in Excel to ask a fellow engineer on a date in University but I like to think that just says I have skilz. (she said no). However, we can all agree that the best decisions are made in Excel and so it remains my go to and tool for the post today.

I use the EIA DUC data as the primary data source for my projections for rig count, production and pace of capital spend and while it’s imperfect, so is everything else, and with the EIA, I can count on consistency . The below table shows my “oily basins” well count spreadsheet. Completions in these basins account for 87% of the completions in the U.S.

In November, the monthly completion rate was only 15% off the peak rate in August 2019 (this of course makes sense the best way to maximize Q3 production for quarterly reporting time). When all is said and counted in 2019, ~8% more total oily wells will be completed than in 2018.

Coupling that data with the below graphic from @PrimaryVision, we get a glimpse into December and can start thinking about Q1 2020. To me, the fall off in the last week of December in pretty staggering. Said another way, if one believed that the 1st week of January was going to be a really busy one for OFS companies it would be a pretty stunning reversal.

Time will tell, but as I think through it, I surmise 3 things.

1. Since June, the Bakken and Anadarko basins have seen a 30% and 25% fall of in completions pace respectively. As the saying goes “Winter is Coming”. In the Bakken, it’s actually winter, in the Anadarko… it’s because everyone has marched West. Bottom line, I don’t expect that pace to pick up in Q1.
2. In the Eagle Ford, Niobrara (DJ) and the Permian where fall offs were less significant, I’d expect to see a marginal rebound in completion pace back to August ’19 levels to get as much production in the beginning of the year as possible. Net of these two points, it suggests a a run rate of 1,150 oily wells a month, 7% down from the peak but even still, that leads to 3% more wells being completed in 2020 than in 2019. You can tell that the capital has moved from the drilling side of the world to completions where the rock can be turned into cash flow- essential to rebuild the balance sheet.
3. Net of this when combined with lower rig counts, OFS companies are going to earn a lot less in 2020 than 2019. The $40 billion question is: do companies ramp up above this projected level with the crisis with Iran? My bet is that the excess dollars will go to debt repayment, not activity and that spells good news for upstream companies and bad news for the service sector.