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The election of Donald Trump to the US presidency last week should further help an already upturning domestic E&P sector through his backing of oil and gas development and potentially streamlining the permitting process on US federal lands, analysts said.
Even as many sectors of the US remain wary of billionaire celebrity Trump, a Republican, his presidency that begins next year is «clearly a net positive» for oilfield services since he has said he wants a fossil fuel revival, Evercore ISI analyst James West said.
«This will add a little bit of fuel to the fire on the North American side,» West said during a Wednesday conference call by his investment bank on the implications of the election on drilling. «If everything Trump as president-elect wants to do is done, this will only add more growth [in that arena].»
North American land drilling has already been moving to what longtime oilfield services analyst West believes will be a robust recovery next year.
«We’re in the early stages now, and expect to see continued rig count, well count and pricing traction … as [oilfield services regain] some economic rent they lost to the E&P industry during the last two years of the downturn,» he said.
Trump’s victory may also spur more drilling since permitting on federal lands is likely to be easier, said James Williams, president of WTRG Economics.
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US drilling in general was brisk from 2008, when President Barack Obama was elected, to 2014, when oil prices began to slide, Williams said, adding this was not mirrored on federal lands because of restricted access.
«Most of [the access issue] can be remedied by a change in administration, rather than a change in laws,» he said.
Under Trump, Williams expects a «less stringent» regulatory regime.
Meanwhile, US oil-directed rigs rose by two for a total 452, Baker Hughes reported Friday.
The pace of rig returns to the field was tempered compared with the high-single-digit or even low-double-digit adds during the past month, analysts noted.
«Oil rigs cooled from last week’s nine-rig add to rise by two,» Robert W. Baird analyst Ethan Bellamy said in his investment bank’s weekly rig count commentary.
The recent week of nine rig additions was preceded by 11 rigs placed into US fields during the week ended October 21.
The latest rig count, the first issued since Trump was elected this week, was likely not affected by the vote since drilling decisions are typically months in the making and setting up new rigs in a field may take weeks.
Meanwhile, just one of the country’s three major oil basins showed activity increases this week.
The Eagle Ford Shale of South Texas, where a rash of upstream companies flocked after it was discovered in 2008 but have since exited or temporarily halted activity saying it is not economic at low oil prices, gained three rigs to 33.
That is just over half the 62 oil rigs working there during the same week in 2015, according to weekly Baker Hughes data.
But the Permian Basin of West Texas and New Mexico was stagnant week on week at 218 — just shy of the 224 oil rigs working during the same week a year ago.
A total of 88 Permian rigs have been added since the late-April trough, and they account for 65% of the 136 rigs that have returned to work in US mostly unconventional fields in the last six months.
Also, rigs drilling in the Williston Basin dropped by two last week to 35, just over half the 63 working in the North Dakota and Montana play during the same week in 2015. West traces the recent slowdown in weekly rig adds to the looming US holiday season. He believes the US oil rig count will grow by about 20-25 by year-end.
West said dayrates for high-specification land rigs have moved $1,000/d to $2,000/d in the spot market, and $3,000/d to $5,000/d for term rigs in recent weeks.
And for hydraulic fracturing, crucial to well completions, «We’ve seen 5% to 10% price increases off the bottom, and have heard that a major completions company has put in place a 30% increase effective January 1,» he said.
Platts news and news analysis is independent, objective and neutral.
–Starr Spencer, starr.spencer@spglobal.com
–Edited by Jason Lindquist, jason.lindquist@spglobal.com
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