Executive Summary: Rigs: The total rig count decreased by 7 for the September 29 week, down to 565 from 572. Infrastructure: The Denver-Julesburg Basin continues to lose steam as multiple operators have laid down rigs in the back half of 2024. Storage: East Daley expects a 767 Mbbl injection in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending October 11.
Rigs:
The total rig count decreased by 7 for the September 29 week, down to 565 from 572. Liquids-driven basins declined by 1 rig W-o-W.
- Anadarko (+1): Camino Natural Resources (+1).
- Bakken (+1): Grayson Mill Operating (+1).
- Permian (-5):
- Delaware (-3): Chevron (-1), Devon Energy (-1), Exxon (-1).
- Midland (-2): Exxon (-1), Occidental Petroleum (-1).
- Uinta (+2): Ovintiv (+1), Finley Resources (+1).
Infrastructure:
The Denver-Julesburg Basin continues to lose steam as multiple operators have laid down rigs in the back half of 2024. The latest is Chevron (CVX), now the largest producer in Colorado after its acquisition of PDC Energy.
The DJ has lost 5 rigs so far in 2024, a nearly 40% decline. The basin rig count totaled 8 in early October, down from 13 rigs at the start of 2024. Operators CVX, Civitas (CIVI), Verdad Resources, and Bayswater E&P have all elected to drop rigs this year.
In the case of Chevron, the company laid down another rig in the first week of September, bringing its total DJ rig count to 2. CVX was running 4 rigs through 1H24 and an average of 5 rigs in 2023, but has slowed activity in recent months.
Using data from Energy Data Studio, East Daley estimates that if CVX maintains a 2-rig program, its volumes would decline 42% by the end of 2028. If CVX drops another rig and only uses 1 rig in the DJ, oil volumes would drop by 77% from current levels. We estimate CVX needs to run 3 rigs to keep oil volumes flat through 2028.
Storage:
East Daley expects a 767 Mbbl injection in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending October 11. We expect total US stocks, including the SPR, will close at 804 MMbbl.
The US natural gas pipeline sample, a proxy for change in oil production, increased 1.6% W-o-W across all liquids-focused basins. Samples increased 22.5% in the Gulf of Mexico, 5.5% in the Barnett, and 3.3% in the Eagle Ford. The Anadarko and Williston decreased 3.5% and 3.3%, respectively. The Williston Basin, Rockies and Gulf of Mexico have a high correlation between gas volumes and crude oil volumes, whereas the Permian Basin basins correlation is less than 45%. We expect US crude production to remain flat at 13.4 MMb/d.
According to US bill of lading data, US crude imports increased by 263 Mb/d W-o-W to 6.5 MMb/d. More than 60% of the supply originated from Canadian pipelines into the US, with the remainder largely coming from ships carrying crude from Mexico, Venezuela and Canada’s Westridge Marine Terminal in Vancouver.
As of October 11, there was ~1233 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude inputs into refineries to increase by ~268 Mb/d W-o-W, coming in at 15.8 MMb/d.
Vessel traffic monitored by EDA along the Gulf Coast increased W-o-W. There were 26 vessels loaded for the week ending October 11 and 22 the prior week. EDA expects US exports to be 3.9 MMb/d.
The SPR awarded contracts for 3.3 MMbbl to be delivered in October 2024. The SPR has 384 MMbbl in storage as of October 4, 2024.
