The COVID-19 pandemic and the low oil-price environment it has created continues to affect global energy markets and activity levels by oil and gas producers. New fracking jobs in the US are not immune to the trend and Rystad Energy expects May to be the month that such activity will hit rock bottom before a recovery begins in the third quarter of 2020. We estimate that the total number of started frac operations in the country's Lower 48 states will end up at around 300 to 330 wells in May 2020, down from April's 337 wells. Many companies chose to initiate complete nationwide frac holidays for the second quarter, and the remaining frac spreads were released after their last jobs were completed in April, which made the decline in started jobs particularly dramatic last month. Some activity is still going on, and we have so far identified 92 started frac operations in May on a standard-month basis. "Our most recent conversations with suppliers, service providers and E&Ps indicate that we will probably see activity stay at the current low level for the rest of the second quarter. "A modest recovery is expected in 3Q20, but stable WTI oil prices in the low- to mid-$30s are required to see this recovery in selected core acreage positions operated by producers with strong balance sheets," said Rystad Energy Head of Shale Research Artem Abramov. Among oil basins, the Permian is on track to contribute the most to the anticipated decline in May 2020. The Permian saw slower activity reductions in March and April than other oil regions and the decline is now catching up. With more than 40 frac operations already identified, we believe that the Permian will still see more than 100 started frac operations this month (the current base case estimate suggests 124 jobs on a standard-month basis). The Eagle Ford, Bakken and Anadarko regions all seem to have reached the bottom, and the current monthly trends exhibit a high degree of noise driven by the timing of completion rounds. Our base-case estimate has fracking operations at 34 in Eagle Ford, 20 in the Bakken and eight wells in Anadarko this month. Niobrara stands out as an outlier as it already has 13 started frac jobs (the base case for the month is 46 wells), half of what was started in all of April. Adjusting for incomplete coverage, if no frac spreads are released, the Niobrara region is on track to see quite healthy recovery in activity this month percentage-wise, though it is still 70% to 75% below the level of fracking seen in February 2020. Activity is slowing down in the Appalachia basin (May's base case is at 60 wells), in line with the guidance of major producers who frontloaded their frac schedules for 2020. Declining rig counts also leave little room for acceleration in fracking before drilling activity is restored. The inventory potential of drilled but uncompleted (DUC) wells in the Marcellus and Utica regions has largely been depleted by now. The Haynesville region shows weak coverage for May so far, so the final estimate suggests that weak fracking from April has extended into the current month. Yet we believe that the running rate of Haynesville activity now should be closer to 15 to 25 wells per month, and it is likely that we will see confirmation of this in next week's update. — Rystad Energy
