Using our North America Supply Chain Analysis Tool – our new upstream cost and spend resource - we assess activity and cost trends for the year ahead.
With the oil price having fallen to under $50/bbl, many operators have slashed their 2015 capex budgets. Critically, North America's upstream sector is dominated by unconventional plays and high-cost horizontal drilling and frac completions are standard.
We forecast that lower prices will result in a 26% drop in US onshore well count, with the number falling from over 37,000 in 2014 to an estimated 27,000 in 2015.
This decline will be driven by operator spending cuts of nearly 40% from 2014 levels. Drilling and completion expenditure in North America exceeded $140 bn last year but we expect operators to commit less than $90 bn to upstream development in the next twelve months.
Such sizeable cuts will have serious implications across the oilfield services sector. Looking at the rig market, we anticipate day rates will fall by 30%, while rig count will drop from an annual average of nearly 1,800 in 2014 to under 1,300 in 2015. This will curtail demand in other services sector markets including tubulars, drilling services, frac proppant and pressure pumping.
Our in-depth analysis of the sector enables us to evaluate activity and spending across plays and operator portfolios. In such a challenging price environment, it's never been a more important to have such a thorough understanding of key cost drivers and upstream activity.
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Our North America Supply Chain Analysis Tool is our brand new cost and activity resource which provides a unique level of granularity behind drilling and completion costs and operator spending. It combines our proprietary research with public data to generate forecasts of activity and demand for equipment and services in the North American upstream sector.
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