A look at rig activity retrenchments in prior commodity price events finds the average at a 51% drop. The smallest percentage decline was 43% in 2001, followed by a 46% reduction in 1991. The largest decline was the 57% reduction in rig activity post-2008, followed by 56% in the first leg down post-Thanksgiving 2014. That initial decline was followed again by a further 54% reduction post-2016. Granted, some of the latter represents the transformational move to pad drilling and technical improvements such as longer laterals that created less demand for rigs when the industry recovered in 2017.

E&Ps who previously announced an initial round of capital spending cuts are now coming out with Round Two less than 21 days later. On average, and this includes the integrated companies, the current projection is for a 30% reduction in 2020 capital spending. But, eliminating the large budget international firms gives a better picture of the developing situation in the land drilling sector. Capex reductions range from 35% to over 50%. That’s just among those who have announced spending reduction. Right now, let’s call it a 40% drop.

And that reduction in capital spending is before acknowledging the $86 billion dollar debt load North American independents face within the next four years, along with the $36 billion debt load on behalf of service companies due within the same time frame.

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