JPM Shale Land Rig Analysis_Analyzing Trends in U.S. Land Activity by Contractor, Basin and Customer Mix

Summary of Key Points from the Conference Call Industry Overview - The U.S. rig count has been on a downward trend since the end of 2022, despite record U.S. oil production and abundant natural gas supply, reflecting the adoption of no or slow growth models from Public Exploration & Production (E&Ps) and significant drilling and completion (D&C) efficiency gains [1][2] - The U.S. land rig count has declined by 5% or 31 rigs on a year-to-date (YTD) basis [1] - Natural gas prices have remained weak, impacting drilling activity, with prices below the marginal cost of supply in most basins since Q2 2023 [1] Rig Count and Activity - The current U.S. land rig count stands at 584, down 8.2% or 52 rigs on a YoY basis [2] - Major operators (Exxon, Chevron, etc.) have increased their active rig count by +22 rigs YTD, while Public E&Ps have dropped -59 rigs [2][31] - The Permian Basin accounts for the most significant number of rig drops YTD, with -15 rigs in the Midland Basin and -3 rigs in the Delaware Basin [33] Basin-Specific Insights - The Haynesville Shale has seen a -29% decline in activity YTD, while the Appalachia rig count fell by -20% [33] - The Williston Basin has experienced a 23% increase in activity YTD, with +7 rigs added [33] Contractor Performance - HP is the most active U.S. drilling contractor with 145 active rigs, followed by PTEN (101 rigs), NBR (64 rigs), ESI (32 rigs), and PD (30 rigs) [2][12] - PD has the highest mix of rigs in natural gas plays at 33%, followed by NBR (17%) and HP (15%) [9] - Among major operators, XOM added 19 rigs reflecting the merger with PXD, while COP and BP added +2 rigs each [31] Public vs. Private Operators - PD is the most levered to Private operators, with 77% of its rigs contracted by Privates, while ESI has 75% of its rigs contracted by Publics [12][16] - Publics/Majors now represent 52% of the horizontal rig count compared to 46% when the Private rig count peaked [2] Rig Type and Direction - Horizontal rigs account for approximately 88% of total rigs in the field today, with a decline of 25 rigs YTD [42] - Public operators have a higher percentage of rigs rated at 1,500hp or greater compared to Privates [43] Conclusion - The U.S. land drilling market is experiencing a significant shift, with a notable decline in rig counts driven by economic factors and operational efficiencies. The performance of contractors varies significantly based on their exposure to public versus private operators and the types of basins they operate in. The ongoing trends suggest a cautious outlook for the industry, particularly in natural gas-focused regions.