The downturn in oil prices in 2020 dealt a severe blow to US shale producers, resulting in less drilling, job losses, and a decline in output.
The US oil sector is hardly alone. Even Saudi Aramco, a famously low-cost producer, reportedly cut jobs after seeing a 25% reduction of net income in the first quarter.
There is a sense, however, that the worst is over. Oil prices have risen from historic lows, in part due to less supply hitting the market.
Will drilling resume next? If so, when? And where?
An early indicator might come from the places where equipment is being stored. Think about all the trucks and heavy machinery employed during the drilling process that were no longer needed.
That equipment is sitting idle in yards close to oil fields. When conditions improve, those yards will start to empty, providing a leading indicator of drilling activity.
Ursa is monitoring these types of yards using satellite radar imagery. In an earlier blog, we focused on a Halliburton-owned lot in Duncan, Oklahoma (see below for an update).
Now, we’re taking a look at a similar lot in Williston, North Dakota.
This lot is located in the heart of the Bakken oil field, which covers most of North Dakota and the eastern part of Montana.
By production, the Bakken ranks as the US’s third-largest oil shale play behind the Permian Basin and Eagle Ford.
Like in the previous example, we used SAR imagery to determine the fullness of the Williston yard over time.
Ursa’s radar imagery experts quantify the SAR energy in the images. This allows us to determine the presence of man-made objects (e.g. trucks).
A SAR activity index was developed to visualize the data. For each observation, we calculated an index score.
A reading above 1 indicates more SAR energy than on average during this time (i.e. the lot is relatively full). A reading less than 1 indicates less SAR than on average (i.e. the lot is relatively empty).
The results are plotted in Figure 1.
The SAR activity index jumped higher in April 2020 after being range bound since the data began in September 2018.
The increase in SAR activity since April coincides with a plunge in drilling activity. This relationship shows more equipment being stored in the Williston yard.
The Williston Basin rig count fell from 49 on March 27 to 11 on June 12, according to Baker Hughes (Figure 2).
North Dakota’s oil production averaged 1.2 million barrels per day (bpd), down from 1.4 million bpd in March, according to the state’s Department of Mineral Resources.
The number of active rigs in the Williston Basin is the lowest on-record since Baker Hughes began providing basin-level data in 2011.
On a national level, the decline in drilling has been even more dramatic, with the rig count at its lowest total ever (Figure 3).
In Oklahoma, the number of rigs in the Woodford Shale play was falling gradually since 2019, but then took a notable turn lower since March 2020.
How has that impacted the Halliburton-owned yard in Duncan, Oklahoma?
As expected, the SAR activity index at this yard has increased since 2019, especially the last few months (Figure 4).
How much longer will this last?
There are signs a turnaround may be nearing. Oil prices have rebounded, flirting with $40 per barrel (Figure 5).
While still below the pre-coronavirus levels, there is already speculation over when drilling could resume.
A leading indicator of such activity should come from a sudden decline in the SAR activity index, as equipment leaves the yard for the oil patch.
Ursa is continuously monitoring vital locations around the world using satellite imagery to provide a deeper understanding of the impacts of COVID-19.
If there’s somewhere you’d like us to take a look, please let us know.