I wouldn't generalize to say small companies are going to zero rigs. I own a share in a tiny project in KY (of all places!) and they're sticking to their drilling plan. I know of a few other tiny players planning to drill shallow horizontal wells in the Mississippi Lime (OK/KS). Despite living near the Eagle Ford I have little anecdotal info there - big cuts are coming but I won't hazard a guess on percentage.
Page 2, "legacy oil production change" suggests that if everyone stops completions, they're going to drop 300kbd.
Yeah, and that's a 300k bpd drop each month! Pretty shocking.
Say you remove half that production drop or 150kbd.
I would not say that. Even for a rough hack you need to guess (1) when the decline will start and (2) how fast and how long will the decline last. You could come up with an aggregate decline far greater than 150k bpd. But it's not going to happen in the first month. It won't even start for a few months yet.
In addition, I think we discussed the possibility of 100kbd of stripper wells getting shut-in.
I doubt that many stripper wells will be shut down. Of course, some get plugged every year. I'm sure $100 oil postponed a lot of death sentences, so there will be catch up. But the forward strip is high enough to keep almost all of them going. The drilling of new stripper wells, a phenomenon I didn't even realize existed until someone posted an article yesterday, will stop. $300k for a well that produces <10 bpd? Holy crap. Just shows how insane $100 oil really was.
Would you buy a drop of 400kbd at current oil prices from NA?
At the current strip? No. I doubt a $60 forward price will drop rig count to 1000. Even if it does, as W notes the "slow" rigs get dropped first (you can clearly see this on page 3 as rig productivity shot up when rig count fell in 2009). So you only need half the rigs to get 75% of the new flow. Drop new flow to 75% of current levels and Bakken output holds steady (79k bpd depletion each month offset by 78k bpd of new flow). Eagle Ford falls a little each month (+119k - 133k = -14k bpd) but is offset by Permian rising (+81k - 67k = +14k bpd). Niobrara (-4k bpd) and the others are basically rounding errors. But you've got +200k bpd from GOM that's pretty much dialed in this year plus another 200k next year. I just don't foresee this big decline everyone's talking about. Maybe in Canada? I don't know.
500k demand growth world wide (1/2%) would get us to equilibrium.
Eventually, yes. EIA still says 1m bpd demand growth but I like 500k. I'm lower than them on China due to slowing GDP growth and much lower than them on Middle East and Africa which I think will decline instead of grow as their oil revenues crash. I'll be wrong if China surprises or if the US sees a strong demand response. Despite slower GDP growth China's passenger car fleet is still growing rapidly. This could materially change their GDP/bbl ratio, which historically has fallen ~5%/year.
I don't have a sense of today's surplus so I can't guess how long it will take for 500k bpd of annual demand growth to to absorb it. My gut says it's not a matter of months. More like 1-2 years.