THRIVE Energy Conference.  Attached is the preliminary agenda for the Daniel Energy Partners THRIVE Energy Conference.  The registration link for the conference is expected to be emailed tomorrow evening, so be on the lookout.  As a reminder, we have secured Minute Maid Park on February 24-26th.   Our opening reception and on field batting practice will take place on the 24th and is open to select DEP subscribers, conference sponsors and guests.  The broader conference will take place on February 25-26th and will include an indoor/outdoor expo.  This year our conference theme surrounds ESG, including the electrification of the oilfield.  Consequently, much of the outdoor equipment will either be electric frac related equipment and/or new pump designs or other equipment designed to enhance safety and/or improve one’s ESG profile.  These exhibits, we submit, are critical for any E&P company to consider, thus we would encourage our E&P readership to attend.  The final agenda will be recirculated next Sunday once we receive final commitments from a few additional speakers and moderators.  We will also recirculate the sponsorship and expo opportunities for those who wish to support this event.

E&P Capital Spending Thoughts.  More 2021 E&P budgets were announced this past week as Ovintiv and Whiting both provided their respective spending framework.  Ovintiv announced a $1.5B budget, down relative to the $1.75B spent in 2020.  However, the real story is the 2021 spend relative to current levels.  For example, OVV spent ~$351M in Q3 while Q4 spending is an implied ~$357M.  That’s roughly $1.4B annualized, thus the $1.5B 2021 plan is up about ~7% relative to the current spending patter.

Whiting Petroleum released a 2021 budget of $228M-$252M, or $240M at the mid-point.  The company’s 2020 spending, we believe, will be about $215M, thus a y/y improvement of ~12%.   But, if we aren’t mistaken, Whiting had planned to spend ~$25-$30M in Q4, thus the 2021 budget relative to the implied annualized Q4 run-rate shows a much more dramatic increase.  Finally, Oasis posted an updated investor presentation which graphically points to 2021 spending being down relative to 2020.  The 2020 capex spend appears to total ~$245M, but the slides also highlight a Q3 E&P capex spend of only ~$9M.  In other words, the likely 2021 E&P capex budget would seemingly be materially higher than a ~$40M Q3 annualized run-rate.  Time will tell if our gut is correct.

Barclay’s Capital, meanwhile, published a helpful research report this week, providing its global E&P spending outlook, a comprehensive review.  While we thought the report was quite good and detailed, the survey yields an expectation for a y/y decline in U.S. onshore spending.  Specifically, Barclay’s forecasts $49.2B in 2021, down ~6% vs. $52.3B spent in 2020.  However, using their estimates, the firm models Q4’20 spending of $10B or ~$40B annualized.  Therefore, the 2021 U.S. onshore spending forecast represents a ~23% improvement versus last quarter’s annualized spend rate.  That’s the real story from our perspective.

What does this all mean?  Simple, for our OFS and capital equipment readers, the best way to gauge 2021 spending as the roadmap to potential activity levels is to compare any of the myriad of forecasts or budget announcements relative to the Q3/Q4’20 run-rate.  The y/y comparisons, in most cases, are less useful, in our opinion.  There is growing harmony around a 20-25% improvement, but our gut leans more assertive given the recent rally in WTI prices north of $50/bbl.  For public companies, we do not see them deviating materially from previously announced budgets/guidance.  There is simply too much pressure for public companies to generate free cash flow and return that cash flow to shareholders.  For some private E&P’s the same capital discipline mantra exists, but not for all.  Therefore, we would suspect some private E&P’s will capitalize on rising commodity prices and plow that cash flow back into the drillbit.  Consequently, if we were in Vegas and had to place a bet on the over/under of a 25% activity rebound from today, we are inclined to take the over, assuming $50+ WTI holds.

STEP Energy Services.  Encouraging activity update from STEP Energy Services.  The company released its Q4 activity metrics along with estimated Q1 metrics.  In the U.S., the company expects to have 2 active frac fleets in Q1, up from one fleet (our frac table anticipated this).  The company’s U.S. coiled tubing business will see its active count rise from 5 units in Q4 to 8 units in Q1.  In Canada, the frac fleet will increase from three fleets to four fleets while the Canadian active CT fleet will expand to 7 units from 5 units.

U.S. Land Rig Count.   The U.S. land rig count, per BKR, rose another nine rigs this past week to 341 rigs.  Increases materialized in multiple areas, a good sign.

Permian Field Trip.  We are heading to the Permian again this week.  In fact, call us a glutton for punishment or simply a glutton, but we will be driving our smoker to Midland to cook for industry friends on Thursday evening.  This will be an outdoor setting and very casual, plus we are making this a family BBQ as the bride and son are coming to Midland to help serve.  Send me a note if you will be in town.

Permian Basin BBQ Cook-Off.  The date is set.  We will host the annual Permian Basin BBQ cook-off on September 28th at the Rolling 7’s Ranch between Midland/Odesa.  A formal Save the Date announcing our 40 cooking teams will go out soon.  We thank those companies who continue to support DEP, but be forewarned the DEP cooking team is prepared to bring home the winning trophy.  We pick the judges.

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Daniel Energy Partners is pleased to announce the publication of its first market research note. In this note, we reached out to executives across the oil service and E&P sectors to gauge leading edge sentiment.

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