US drilling rig totals up 91 % in last nine months

Bloomberg/Fuel Fix:
When the who’s who of the oil industry met a year ago in Houston, Saudi Arabia’s energy minister had harsh words for U.S. shale drillers struggling with the worst price crash in a generation.

“Lower costs, borrow cash or liquidate,” said Ali Naimi, who managed the world’s largest oil-exporting business for more than two decades.

In the year since, the drillers have largely taken Naimi’s advice. While more than 100 have gone bankrupt since the start of 2015, the companies that survived have reshaped themselves into fitter, leaner and faster versions that can thrive with oil at $50 a barrel. Now, it’s OPEC that’s seeking solutions, desperate to drive prices up even further in a push to repair the economies of the countries it serves.

“The shale business is rejuvenated because of the difficulties it has been through,” Ben van Beurden, the chief executive officer of Royal Dutch Shell Plc., said in comments last month.

After a two-year downturn spurred by oil’s plunge to $26 from $100, U.S. production is on the rise once again, opening the door for another showdown with the Organization of Petroleum Exporting Countries. The number of U.S. drilling rigs has grown 91 percent to 602 in just over nine months. Meanwhile, production has gained more than 550,000 barrels a day since the summer, rising above 9 million barrels a day for the first time since April.

And as shale returns with a vengeance, it’s not just the pioneer cowboys that dominated the first phase of the revolution in the Bakken of North Dakota. This time, Exxon Mobil Corp. and other major oil groups are joining the rush. It’s a new reality that OPEC and Russia — the main forces behind the production cuts approved last year as a solution to re-balance the global market — are starting to acknowledge.
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Add to the mix the election of President Donald Trump, carrying the promise of fewer regulations, added pipelines and energy independence, and you see why the mood at CERAWeek, the conference that every year gathers oil executives, bankers and investors in Houston, will be far brighter next week than in 2016.

“North American oil companies are going to increase their spending by 25 percent in 2017 compared to last year,” said Daniel Yergin, the oil historian-cum-consultant who hosts the CERAWeek. “The increase reflects the magnetism of U.S. shale.”
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The equity markets are supplying much of the new capital this time.  But the biggest difference in this increased production is the new efficiencies that have made the shale revolution sustainable.  Drillers have cut their cost of operation to the point where they are profitable at a price that is roughly half of what it was before the big oversupply problem.

What US producers need most at this point is a change in the refining sector so that the light crude from the shale wells can be used in this country.  Much of the current capacity was developed to handle the heavy crude from imports.

I do think the Trump administration's deregulation efforts will lead to increased production and even more efficiencies going forward.

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