US land drillers sent 2016 packing with a bang.
Since May, the drilling recovery has looked exceptionally strong on a percentage basis. The December trend looked exceptionally strong on an absolute basis too with 65 US rigs returning to work.
December 2016 delivered the best absolute rig count increase of any December since 1982, and a rig today is worth at least two back then.
In the chart below, we've plotted cumulative weekly rig count changes for the month of December. We captured the past few years as well as the two next best Decembers since the turn of the century for context.
1Q17 is going to feel downright frothy in US light tight oil plays. It may seem early to say this, but we are actually becoming concerned about early cyclical overshoot during 1Q17. Specifically, crude markets may react negatively to surging US oilfield activity sooner than we previously expected, perhaps as early as February/March 2017.
Even if oil prices do not immediately react, look for concerns about an overextended US recovery to become commonplace early next year. Before that though, look for an assortment of positive 4Q pre-announcements from US onshore service companies in January.
December's stellar oilfield activity trend line almost certainly pushed results above prior expectations for US leveraged service/drilling companies. While analysts were on holiday, roughnecks were busy turning to the right. Expectations will be revised when the number crunchers go back to work in the new year.
This December is one to remember.
This excerpt is from Infill Thinking's final weekly rig count update in December. These regular updates include rig count tables and charts and a weekly analytical spotlight on a new trend. You can see the latest update here.
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About the source of this post: Joseph Triepke created Infill Thinking in 2016 to deliver high-caliber oilfield research updates to O&G decision makers. No ads. No clutter. No noise. Just research on the trends that matter most delivered to subscriber inboxes. Learn more about this new resource or try it free for 30 days.
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