Oil and gas prices have risen because production has not kept pace with increasing demand. More drilling activity is required to increase production rates.
Issues to monitor:
Higher rig counts are needed to drill more wells. Rig counts have increased at a slow rate because of a lack of equipment and labor. The daily rental cost of rigs has spiked as a result. The location of the rig activity is important. A high rig count in an area that has a low production rate per well might have less impact than fewer rigs drilling in an area that has a high production rate per well.
High-impact production projects typically take several years to develop. New discoveries are needed to offset production declines from existing fields and to increase production to meet rising demand. Look for large projects that are being developed in foreign countries or in the Deepwater Gulf of Mexico. The impact of several large projects commencing in the same year can affect the supply/demand balance.
Apache's Weekly Energy Perspective is a weekly publication with topics, summaries and statistics at a glance designed to keep you updated on the latest industry events.
