In keeping with tradition, we use our final note of the year to provide a firm update but kick off this weekend’s note with a couple quick industry observations.
E&P Activity Anecdotes. Visited/updated with a small basket of E&P companies recently. These companies are collectively running 36 rigs or ~6% of the U.S. land rig count. So, for starters, this is a very small sample (remember, it was Christmas week), but discussions and sentiment regarding 2022 were the more salient takeaways. First, when asked where this collective rig count could go, one E&P reports it will drop one rig in Q1 and then stabilize at a one-rig program. The other companies don’t have any additional rigs planned yet, but under the right circumstance, an additional three rigs could be added between all the other contacts. In other words, with this very small basket, the rig count moves from 36 rigs to a range of 35-38 rigs. Our sense is these companies locked in their 2022 desired programs early and are now set for next year. As always, extrapolating data points can be dangerous but recall from last week’s note that a number of land drilling contacts report less inquiries for rigs. Put both of these together and package in the collective headwinds such as Omicron, supply chain woes, casing shortages, labor shortages and an oil tape which has moderated in recent weeks, and all of this would seem to suggest an activity stabilization is beginning to unfold.
New Frac Player? This week privately-held Regiment LLC announced two small asset acquisitions which included pressure pumping units as well as frac stack equipment. No specific transaction details were provided. The combined purchases, along with Regiment’s legacy equipment, yields a total fleet with 75,000 HHP. Some of the equipment is Tier 4 rated while we believe some of the equipment also has a dual fuel capability. It’s1 unclear whether Regiment will pursue the HZ frac market or focus on vertical work, but the total HP would suggest at least one fleet. By way of background, Regiment started in 2017 with a focus on the pump down market. Also, we don’t yet know who sold the frac equipment, but Regiment’s press release indicates some of the equipment came from an existing pressure pumping company while other assets came from operator. We may be premature in our criticism, but it defies logic for an existing pressure pumping company to sell equipment to a potential competitor, regardless of the status/condition of the equipment. That said, Regiment’s press release would indicate it will transition to now provide pressure pumping services.
BKR U.S. Land Rig Count: +7 rigs w/w to 570 rigs.
DEP 2021 Review: What a difference a year makes. To quote Bon Jovi, during 2020 DEP was livin’ on a prayer, but thanks to strong industry support, we managed to survive and grow in 2021. Your continued support is hugely appreciated, an understatement to say the least. Today, we are blessed to have over 140 corporate subscribers while a number of other companies support DEP via event sponsorships. Many, however, do both and to those friends, we offer a very deep thank you. Support from our industry friends allowed the firm to grow from a husband/wife team in April 2020 to a five-person team today. As we move into 2022, efforts to grow the research team are underway. Ideally, we will initially broaden our weekly commentary to include more E&P content and from there, we’d like to expand the content associated with other OFS verticals. Right now, the challenge is persuading quality folks to step away from an established enterprise in order to join a start-up. Additional capital may also be necessary to entice the right people, but that’s something we are willing to entertain.
Looking back, 2021 provided a number of great learning experiences and no shortage of travel. Starting with the latter first, we hit 147 nights at Hilton this year. This is not all necessarily field travel, but it also excludes stays at non-Hilton properties. Some may cringe at travel, but we love it, so look for more field tours in 2022. As for conferences and industry outings, DEP hosted multiple top-tier events, beginning with our THRIVE conference in February. No doubt, THRIVE 2021 was a tad stressful as we were the first major event during COVID. Recall, back in February few had been vaccinated, and the country was emerging from a peak in COVID cases. Moreover, DEP had big financial commitments on the line, thus the potential of not hosting THRIVE could have sunk the firm. Thankfully, our sponsors stepped up big time, allowing us to host what turned out to be a well-received industry conference and expo.
With one success behind us, we then doubled down with smaller events including our Whistling Straits Energy Forum followed by our Telluride Executive Series. Again, the industry stepped up to support us, a real blessing given these were also inaugural events. Meanwhile, during the year, DEP continued to host small outings such as our quarterly Midland receptions, various dinners in Denver, Fort Worth, Dallas, OKC and Houston. For our sports fans, we continued our golf outing tradition, but kicked off a few small hunts as well as networking events at major sporting venues. And lastly, we wrapped up the year with the Fourth Annual Permian Basin BBQ Cook-Off in September, an event which surprised to the upside as over 1,800 friends showed up to enjoy good cooking from 58 BBQ teams. In keeping with our objective from the start of DEP, all these events were in-person.
Of course, the challenge with numerous outings/events is time away from research, thus the desire to add more research staff. We hope the first new team member will join by the end of Q1. Of course, more staff means more cost, so we will be making a modest tweak to DEP’s 2022 pricing. Given the inflation woes affecting everyone, we hope this doesn’t come as too much of a surprise. Thus far, we have virtually no push back, so thank you to those who are working with us. Also, please recall our original pricing was set in 2020 when the world was seemingly coming to an end.
Finally, this week we will begin the process of cleansing our distribution list to remove any non-paying clients. If next Sunday you find no DEP note in your inbox, it’s because you never formally signed up. To the extent this applies to you, please know we hold no ill-will. Rather, we simply wish to be paid for our work. Just as we suspect you don’t want to give away your product or service for free, neither can we. To those readers who lose access, but want it restored, then simply reach out and subscribe. It’s an easy process. Lastly, for those subscribers who forward our email to external parties, we respectfully ask you to please stop. That hurts us and BTW, we can tell when our notes have been forwarded.
DEP 2022 Events: Our major events are locked down and listed below.
- THRIVE Energy Conference – Minute Maid Park – February 22-24
- Bynum School BBQ Fundraiser – Midland, TX – April 7
- Houston Golf Outing – Kingwood Country Club – April 15
- Telluride Executive Series – Peaks Resort & Spa – June 28-30
- European Energy Conference – The Gleneagles Resort, Scotland – August 30 – September 1
- Permian Basin BBQ Cook-Off – Rolling 7’s Ranch – September 29
- Houston Golf Outing – Woodlands Country Club – October 11
Other events which we intend to host, but don’t have firm dates just yet include:
- Permian Basin Quarterly Receptions
- London Energy Day – Targeting Mid-June, subject to corporate interest and travel restrictions
- OKC Steak & Baseball – July 2022, but waiting on baseball schedule
- DFW quarterly receptions and dinners
- Colorado Rockies Outing
- Big Easy Clay Shoots
THRIVE 2022: We are waiting on two final speakers to commit to our agenda and then we will blast it out. Look for something this week. Also, if you have any interest in sponsoring or exhibiting at the conference, please let us know. As a reminder, this in an invite-only event open to subscribers, sponsors and select industry friends. Unlike other events, we don’t do individual ticket sales. This way we can monitor who attends.