Rig Rout Puts Smaller Drillers in Front as Oil Majors Scale Back

U.S. Bottoming

In the U.S., the oil-rig count may be close to a bottom, Bloomberg Intelligence said Monday after Baker Hughes Inc. reported a drop of three to 628 last week. The count has slid 61 percent since October.

While tumbling rig costs have provided the small players with a window of opportunity, they’ll still have to raise funds to continue drilling. Sound Oil reported a pretax loss of 4.9 million pounds ($7.7 million) last year and Cairn lost $559.1 million.

“In the small- and mid-cap world, even through the years of $100 oil, some producers have actually seen gearing grow significantly, showing how capital-intensive the business is,” said Mark Wilson, an analyst at Jefferies Group LLC. “So, yes, there’s an opportunity for the smaller companies; the challenge is to attract drilling funds.”

Crude dropped to $43 a barrel in March from $107 last June and has since started to recover as companies cut drilling in the U.S. and stockpiles decline. Prices may reach $80 within six to 12 months, according to Sound Oil’s Parsons, who said his company has funds for its first three wells.

To contact the reporters on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net; Rakteem Katakey in London at rkatakey@bloomberg.net. To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Amanda Jordan, Will Wade


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