(Petrolytics) - While all eyes are on the anticipated OPEC+ meeting, a number of lower-profile headlines have skirted across the tape. Namely:

1. Oil and gas drilling set to hit a record low
2. Big decline in US oil and gas production in April
3. Viper and Diamondback release updated guidance - typically a good barometer for onshore independent E&P activity; they brought back 3 frac spreads, but lowered overall production guidance (lowering rig count and completion numbers)

It's important to keep in mind that the headlines similar to #1 are typically more bearish than reality (shocker). We discussed last week the importance of looking past active rigs. In summary, perhaps one non-trivial reason for drilling few wells is, simply, increased efficiency.

While no doubt capital expenditures have decreased significantly, it's completely plausible that operators are more carefully drilling wells (due to technology improvements - e.g. seismic imaging, ILX step-out distances, etc). Even more, these operators could be phasing projects. Dividing CAPEX-intensive projects into sub-components truncates a portion of the outcome distribution's left-tail. Put simply, drilling fewer wells in small phases provides optionality through exit opportunities; effectively mitigating some downside risk.

In any case, capital efficiency typically improves if one can drill fewer wells and recover similar volumes. It's true that there's value via acceleration of volumes, but maybe that's not enough to overcome budget cuts.

Lastly, stay safe out there. It's been 110F+ outside lately. Scorching.