Producer statements in quarterly earnings calls or press releases are customarily good guidance to forthcoming E&P activity, and in times of stable market conditions these expectations broadly correspond to what actually happens. However, the pronouncements from 3 months ago didn’t anticipate the current period of market volatility and uncertainty and it's possible that some producers have changed their capex plans. We can help answer this question now by looking at how rig and frac crew activity is changing.

Given these substantial changes in the market, we thought it valuable to examine activity from several different directions looking for anomalous trends/levels - nationally, regionally, by target, and, especially, by the subset of producers that do announce specific rig and crew targets. Since Hyperion enumerates every rig and crew operating in our coverage states, we can slice and dice the data anyway we like.

National Activity

Overall, the US rig count is up about 45 rigs since the beginning of Jan, but crews are flat, having fallen 15% in the last few weeks after slowly rising in the first few months of the year. (Note the two different scales, which normalizes changes for very different levels). Breaking down by oil vs gas tells a broadly similar story for rigs, both oil and gas: slowly rising since the beginning of the year, and no apparent reaction to price volatility so far.

Frac crew activity tells a very different story, however. Oil crews are essentially flat, with variations less than ± 10%. Gas crew counts have been very volatile, however, rising over 20% from the beginning of the year to the peak, then falling recently by 15% to end just about where it started. Gas crew counts do appear to be responding to gas prices and gas price variations. What this data can’t tell us is what’s responding to what, i.e. are operators responding to price signals that indicate supply/demand mismatches, or are they managing production to respond to anticipated demand, driving price signals? (Most likely, the answer is “Yes.”, i.e. both.)

The more responsive nature of crews is to be expected, for two reasons. First, fracking and completions are broadly the more expensive step in the shale drilling process, though the proportion varies greatly.^[1] Second, as the second step in the drilling process, if an operator needs to save cash it provides a “real option” decision point, as it allows them to reduce current outlay, while building a cheaper inventory to bring on later when their cash position is better.

Regional Activity

As can be expected, regional breakdowns show some very different patterns than the national picture. Given that Permian is almost exactly half of all activity in the lower 48, it should come as no surprise that it exhibits a pattern that is nearly identical to the national picture - the national picture is the Permian. (EIA’s most recent monthly production for 2024 confirmed this - with essentially all of the US increase in oil production coming from just this one basin.^[2]) The one area that was a bit surprising given the overall picture is the frac crew count. As noted above, the oil crew count is essentially flat - but in the Permian, an oil-focused basin, we have seen a sharp decline in the last five weeks - losing nearly 20%. This is what one might have expected from the price action.

There are some surprising results from the other regions. Please contact a Synmax sales representative to get access to our data and see what they are.

Announced Activity

The subset of total activity that is from companies that announce their specific rig and crew plans is smaller, about ⅓ of the total activity we see. The story here shows several different features that bear mentioning. As you can see below, rigs have been running a bit higher than announced and crews substantially so, though both have declined in the last few weeks after rising. Though only Matador has said that they are pulling back, several clearly have. Note that of our set of operators, some announce rig but not frac crew count expectations. Also note that these targets are a mix of quarterly and annual targets.

As we discussed before, however, gas and oil prices have followed very different trajectories this year, so it’s clearly worth looking at these separately (though we will lose the announced levels).

And here is where some significant differences appear. Surprisingly, gas rigs for this subset have been on a steady decline, but frac crews have broadly followed prices. Oil rig activity has followed the overall pattern, rising before falling recently, whereas crew counts have been gently falling.

What is clear from this data is that operators that announce their activity have not been representative of the broader universe of operators. The other significant conclusion is that the understatement of crew counts is a “sin” common to almost all operators. With few exceptions, those that announce crew count expectations ran much higher levels during the quarter. Finally, there are a few operators that have clearly responded to price pressures. Please contact a Synmax sales representative to get access to our data and see what who are.

Conclusion

Overall, it appears that producers are adopting a wait-and-see approach to the current price environment. There is little indication that operators are changing their plans quickly, with just a couple of exceptions. In addition, the data calls into question whether operators that announce their plans (i.e. public companies) well-represent the broader universe of operators, at least in the short run.

Producers constantly re-evaluate their capital expenditures and plans, but they also exhibit significant inertia in that planning. There is substantial resistance to responding to daily pressures, and plans, once made, are very sticky. Consequently, this is a topic that will need to be revisited, especially if prices stay depressed for any length of time.

But either way, you’ll see it on Hyperion first. No need to guess.

^[1] Trends in U.S. Oil and Natural Gas Upstream Costs

^[2] U.S. crude oil production rose by 2% in 2024 - U.S. Energy Information Administration (EIA)