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Coming on the heels of the last few articles about DUCs (drilled uncompleted wells) another discussion that is beginning to occur between analysts and companies is the shortage of equipment and manpower. Since pricing began to slide in 2014 over 350,000 people have lost their jobs across the United States and around the world from service companies, E&P’s, etc. While these cuts were necessary due to the cuts in CAPEX and D&C budgets. The question is what occurs if pricing and liquidity in the commodities market opens up allowing for E&P’s to begin drilling and completing wells again? According to the IEA’s outlook oil market is set to balance in second half of 2016 begging the question of whether this shortage will occur sooner rather than later.

By using DrillingInfo’s rig analytics and DUC monitor we overlayed strip pricing by month to see how the number of DUC’s compares to that of pricing. The question that remains is what pricing will it take to begin completing these DUCs; strip or hedged?

Through price swings up and down the general trend is that as things pick up more field workers are hired and crews get back to work. There is some lag time as equipment needs to be fixed and prepared to get back to work and workers need to be retrained on equipment. This shortage creates a small price pop due to increased demand of services and a shortage of equipment and people that generally fixes itself over a relatively short time frame. A price rebound today might be different than those of past; the main reason DUCs. The number of DUCs around the country is topping 3,304 (as of 6/12/2016; taking into account a 6 month time lag in accurate reporting) across multiple basins and hundreds of operators as seen in the figure below. While there is enough HP in the market ...