The Permian Basin is no longer the nation’s top destination for frac crews, another consequence of the unprecedented collapse in oil prices brought on by the global coronavirus pandemic.
Marcellus Shale Edges Out Permian Basin
According to Houston investment advisory firm Tudor, Pickering, Holt & Co., the Marcellus Shale – a natural gas rich region stretching across Pennsylvania and West Virginia — now accounts for 31% of the active hydraulic fracturing crews in the United States. That’s enough to edge out the Permian Basin, which has seen its share drop to just 30% in recent weeks as drillers shut-in dozens of wells throughout West Texas and Southeast New Mexico.
Another 28% of active frac crews are equally divided between the Eagle Ford Shale in South Texas and the Haynesville Shale in East Texas and Louisiana.
Natural Gas Prices Haven’t Fallen as Dramatically as Oil
COVID-19, the novel coronavirus, has sickened more than 5.8 million people worldwide, killing over 361,000. More than 1.7 million confirmed infections – including more than 100,000 fatalities – have been reported in the United States.
Oil prices collapsed as much of the world went into lockdown mode. In fact, futures for West Texas Intermediate – the Permian’s lifeblood – actually entered negative territory for a brief period last month. Although the easing of restrictions in the United States and elsewhere has allowed the market to rebound somewhat, oil prices still hover around $30 per barrel – far too low for drillers to turn a profit.
The global pandemic has also had an adverse effect on natural gas prices, but the decline has been nowhere near as dramatic, with demand down just 2% versus 6% for oil.
U.S. Rig Count Hits Record Low Amid Coronavirus Collapse
Of the 450 available frac fleets in the United States and Canada, only 70 are deployed in the field.
Meanwhile, the nation’s rig count, an important indicator of oil and gas production in the United States, continued to plummet for an 11th-straight week and now stands at a record low of 318 – 21 fewer than just a week ago. The previous record low of 404 came during the 2014-2016 oil bust.
According to Tudor, Pickering, Holt Managing Director George O’Leary, a recovery isn’t likely until the fourth quarter of 2021.
“This is setting up to be the sharpest quarter over quarter active horizontal frac crew count decline in memory,” he wrote. “Putting lipstick on a pig, it was a teeny-tiny bit comforting to see the month over month decline rate slow in May versus April, but it’s certainly quite bloody out there.”
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