Why does the author think a higher oil price no longer means more rigs?

First, he cites low drilled but uncompleted well inventory, or DUCs, across major U.S. basins:

I think this actually cuts against his point. If operators are running low on already-drilled wells, they’ll need to drill more new wells to keep production flat or grow it.

Next, he cites three “breaks” that he argues make this cycle different:

1. E&P ownership has changed, and shareholders want returns instead of growth.

2. Core shale inventory quality is degrading.

3. Oilfield service equipment has been retired.

This all supports more drilling ahead, not less.

First, at $90 oil, well returns are very strong for many operators. Shareholders want returns, and one of the best ways to generate those returns is to drill high-return wells at attractive oil prices. The futures strip is lower than spot, but even at $75+ oil, IRRs are still very compelling across much of the industry.

Second, core inventory degradation means more wells are needed to keep production flat or grow, not fewer. Shale wells decline quickly, so as new wells become less productive, the industry has to drill more wells just to maintain production, let alone increase it.

Third, retired oilfield service equipment does not change the fact that E&P companies still need to produce oil. Producers hire OFS companies to drill and complete wells, and if there is not enough capacity to meet demand, then new equipment gets built. That’s why replacement cost is such an important valuation anchor for drilling companies, and why I’ve emphasized it in prior articles. The two Bison Insights drillers I’ve written about still trade far below replacement value estimates:

So if higher oil prices will lead to more drilling, why haven’t rig counts moved higher yet?

Because there’s usually a lag. Producers first need to approve budget increases and sign contracts, then OFS companies need to assemble crews and move rigs before activity shows up in the rig count. Historically, rig additions build over time after a move higher in WTI, often not peaking until around 40 weeks later. Today, we’re only roughly 8 weeks removed from the Strait of Hormuz crisis and the move higher in oil prices:

Recent on-the-ground data points support the view that activity is starting to rebound. In a recent Bison Insights interview, the CEO of a drilling company said inbound calls have increased and that he expects utilization to move meaningfully higher by June. A senior contact at an oil and gas private equity firm also recently told me the steel casing market is tightening. Since casing is required to drill new wells, tighter casing supply is an early sign that operators are preparing to drill more.

So yes, the old shale playbook has changed somewhat. U.S. shale is more disciplined and may not respond as quickly as it once did. But slower does not mean no response. And because rigs have been scrapped, the market is tighter, so even a modest increase in activity can move the needle much more for OFS valuations.

That’s why I continue to think the two pure-play drillers I’ve written about on Bison Insights are very compelling here, as are other ancillary beneficiaries. If we’re in the early stages of a multi-year drilling upcycle, I don’t think current valuations come close to reflecting that setup.

Below, I quickly revisit both names, discuss a third potential beneficiary, and share why I still think the market is underestimating their upside.

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance is not indicative of future results.

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I recently …

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ARC is primarily a natural gas producer, with natural gas representing approximately 60% of its 2025 production, with liquids representing the remainder. Based on 2026 estimated volumes and cash flow, Shell’s transaction value implies roughly C$53,000 per flowing boe/d and a 6.0x 2026e EV/DACF cash flow multiple. ARC also had a 1P PV-10 value of approximately C$14.5 billion, implying Shell is paying 1.5x ARC’s proved reserve value:

These transaction metrics indicate promising read-throughs for nearby Canadian E&Ps that could also become acquisition targets, including two upstream Canadian producers I’ve written about here on Bison Insights. Applying the transaction metrics to these two companies implies substantial upside from current prices.

Below, I walk through my view of the ARC deal in more detail, along with what it could imply for the valuation of these two Bison Insights ideas, both of which are compelling acquisition targets in my view.

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence.

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Here is the link to the full article about that company:

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This may only be the beginning of the U.S. export boom, as reports indicate that an unusually large number of oil tankers are now heading to the U.S. to load crude amid the largest oil market supply disruption in history:

The immediate result of these exports is large U.S. crude and product inventory declines, which have begun showing up in the data. Last week, total U.S. inventories fell by 13.1 million barrels, the first large U.S. draw since the Strait of Hormuz disruption - potentially an early sign that onshore OECD inventories are beginning to tighten. These draws matter because U.S. inventory levels have historically tracked oil prices closely:

If exports continue rising, how fast could inventories fall? If oil inventories decline rapidly, what will that do to oil prices? And what could that mean for energy equities from here?

I explore these fundamental oil market questions below. And then I consider the implications for energy equities, particularly the investment ideas I’ve shared here on Bison Insights.

These ideas have done quite well despite the recent pullback, both on an absolute basis and versus the XOP oil & gas producer ETF and the broader stock market:

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance may not be indicative.

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This extreme volatility is essentially the story of the oil market over the last seven weeks: conflicting headlines from both sides of the conflict, with oil prices and related equities swinging wildly in both directions.

Oil market gallows humor, Strait of Hormuz edition, from X:

I’m not a military expert, I’m not a political guru, and I can’t accurately predict short-term oil prices. But I am an expert in evaluating and investing in oil & gas stocks. In the middle of this volatility, there is one oil producer that is particularly compelling. It could be a grand slam in the current price environment, while having valuation upside even at $70 oil.

My thesis is straightforward: despite steady progress in an operational and financial turnaround, the market still does not fully appreciate these improvements. The company trades at a steep discount to peers on both cash flow and reserve value:

This undervaluation has persisted even after the company recently posted another very strong quarter, leading one leading investment bank analyst to comment:

“Overall, this is a solid quarter for them… We believe that posting better-than-expected quarters will start to earn more confidence in the story from the market and be a key factor in driving down the valuation discount relative to mid-sized peers.”

I agree. As this company continues to prove out its turnaround, reduce debt, and repurchase shares, the market should gradually narrow the valuation discount and may eventually assign the stock a premium multiple. If its stock were to merely rerate to the peer average cash flow or reserve multiple, the upside would be compelling:

The company’s oil weighted production provides it with strong upside to higher oil prices. But it is already generating substantially higher cash flow, which is accelerating debt reduction and share repurchases. This process should help drive a faster re-rating toward peer average valuations, which is why I think it offers some of the highest upside in the oil sector today.

This dynamic is simple, yet powerful. And it is happening monthly:

Meanwhile, the existing discount to peers and reserve value presents a wide margin of safety if oil prices move lower, creating a “heads I win big, tails I still win” type of setup. It may trade down in the short term if oil falls, but that could offer even more accretion to the active share repurchase program, which could lead to a higher fair value over time.

This stock is one of my largest investment holdings and is a new idea here on Bison Insights. Even after the recent pullback in oil equities, other Bison Insights ideas have continued to largely outperform the broader energy market, as they were before the war too:

Disclaimer: This material is for informational and educational purposes only and should not be considered an investment offer, solicitation, or recommendation. Please consult a financial advisor and conduct your own due diligence. Past performance is not indicative of future results.

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The backdrop is what happened this week in public markets. On Wednesday, All Birds ($BIRD), a shoe company, announced that it’s pivoting to AI compute infrastructure, and the stock has soared by over 300%!

Then Thursday, Myseum ($MYSE), a small software communications company, announced its own pivot and rebrand as Myseum.AI, and its stock soared, rising by over 100%:

Naturally, there were memes mocking how ridiculous this trend looks on its face:

But the stock reactions point to something: the market is screaming for more AI.

There’s one company I’ve written about that fits this theme far more naturally. It is already building infrastructure that could be used to power AI data centers, in an area where there are more applications for new data centers than available power - by a lot.

This company’s oil and gas assets may also be worth well above the current stock price. This offers the company the opportunity to reward shareholders with a large distribution via asset monetization or spin-out, along with the capital base to jump start the pivot to AI.

This is far more credible than a shoe company claiming they’re now “doing AI infrastructure” and rocketing their stock price higher. But still a thought experiment.

Where could that go? How high could the stock soar? 2x? 10x? I don’t know.

But if companies like $BIRD and $MYSE can skyrocket on an AI pivot in narrative alone, it’s at least worth exploring what could happen if a company with tangible, directly related assets chose to embrace it.

Disclaimer: This material is for informational and educational purposes only and should not be considered an investment offer, solicitation, or recommendation. Please consult a financial advisor and conduct your own due diligence. This is a speculative thought experiment and nothing more. Do not rely on this.

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1. How many barrels of oil are in storage?

2. How quickly are those barrels being depleted?

3. What does this mean for oil prices and related equities?

There is a lot of noise in the market. Some estimates are being published that treat SPR releases and other inventory draws as if they’re new supply, when those are actually still barrels coming out of storage. Other estimates are too high, confusing “disrupted” barrels that are still reaching end markets with “missing” barrels that are not.

The “missing” number is a truer estimate of how quickly oil is being pulled from storage, because it’s an estimate of barrels not reaching end markets that otherwise would have.

I calculated how quickly inventories are drawing down, which allows for a real-data framework for thinking about future oil prices. Historically, inventories and oil prices have moved inversely: when inventories are low, prices tend to be higher, and when inventories are high, prices tend to be lower.

Analyzing the pace of the current drawdown and the historical relationship between inventories and prices offers me a credible, directional framework for thinking about how oil prices may respond if the Strait reopens tomorrow, one week from now, one month from now, or, in a worst-case scenario, several months from now or longer.

Below, I do a deep dive analysis into these fundamentals. I then explore the implications for energy equities, particularly the investment ideas I’ve shared here on Bison Insights.

These ideas have done quite well despite the recent pullback, both on an absolute basis and versus the XOP oil & gas producer ETF and the broader stock market:

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance is not indicative of future results.

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The outperformance appears to reflect growing market expectations that North American oilfield services activity will begin to rebound soon. In a recent article, I analyzed the historical relationship between higher oil prices and rig additions and found that rigs are typically added with a lag, then build gradually over time.

We’re still very early in the cycle, only about five weeks removed from the post-Hormuz closure rise in oil prices. If the historical rig-addition pattern holds, rigs should begin to be added over the coming weeks and months, improving utilization, day rates, and cash flow for oilfield services companies. The CEO’s comments in my interview were consistent with that pattern beginning to play out: conversations are picking up, and he is ‘pretty confident we will be at higher utilization by June.’

Improved utilization not only improves cash flow, but also signals a tighter oilfield services market, making existing equipment more valuable and pushing the stock closer to replacement cost, which is far above the current valuation based on management’s own estimate and relevant industry data:

There is a value investment saying, to “buy cyclicals at a discount to book value and sell on a multiple of earnings.” This appears to be one such opportunity, with the stock still trading very cheaply at the beginning of an apparent turn of the cycle. Yet it is also generating substantial EBITDA and free cash flow - an oddity that I am capitalizing on via large position sizing.

For more color and a more in-depth discussion of the company’s history and operations, I’m pleased to share the interview below. I also show a chart illustrating the historical path of oil prices and rig activity - they say that history doesn’t repeat, but that it does rhyme.

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance is not indicative of future results.

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The company has substantial reserve value and equity upside potential, but investors have been focused on the risk that the preferred financing structure could yield high share dilution, and as a result have pushed the equity to a very low valuation:

Recently, the company provided a key update that changes the dilution math. The new agreement isn’t a clean win for common shareholders, but the upside case is mostly intact. Also, the downside case outcome is likely much less severe than what had been possible before this development.

The key question now is straightforward: how many common shares will ultimately be outstanding once the preferred financing is gone? No matter the scenario, the upside appears compelling from here:

In the update below, I walk through the new agreement, estimate the likely ending share count, and then revisit what that implies for valuation.

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance may not be indicative.

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Historically, energy has represented a much larger share of the index. At current levels, most investors have very little exposure to the sector. In practical terms, energy risk appears structurally under-owned.

By “energy risk,” I mean that periods of rising oil prices have historically created pressure on the broader economy. Higher oil prices raise input costs across industries and compress margins for most businesses. For that reason, rising oil prices have often coincided with recessions:

The good news is that a two-week ceasefire and the reported reopening of the Strait of Hormuz are clearly positive for the many sectors hit by the disruption, which is welcome news not just for oil consumers, but for a wide range of industries. The Strait is critical for LNG, helium used in semiconductor manufacturing, and petrochemical feedstocks used in a variety of other products.

At the same time, it remains unclear whether the Strait of Hormuz is truly and durably on the path back to normal, as attacks have continued after the announcement and ships are mostly still not going through the Strait - despite the constructive statements being made by President Trump and others.

Even in a best-case scenario, oil flows will take at least several months to normalize, after which the market would only return to the constructive underlying fundamental oil market setup that existed before the disruption, as I discussed in my latest article.

The disruption that began in late February will begin showing up in upcoming Q1 financial results across the broader market and will continue to affect second-quarter results. With WTI oil still around $95 per barrel, the broader stock market, which is already trading near record-high valuations, is vulnerable if economic growth slows more than investors expect:

Against this backdrop, there is one security in particular that offers a very inexpensive hedge against a broader market downturn. Historically, this security has tracked the S&P 500 closely during drawdowns — but the key difference is that put options on this security cost only a fraction of comparable protection on the S&P 500.

If the historical correlation holds, at-the-money mid-October puts on this security — with roughly six months of protection — could generate payoffs of 500% to 3000%+ depending on the extent of the market decline, more than double the return of buying SPY puts directly:

The result is that if the broader market experiences a large decline, investors can achieve meaningful downside protection with a much smaller allocation to puts on this name.

An additional tailwind to this idea is the growing stress in private credit. Over the last several years, capital has poured into illiquid private loans in search of yield. Now that defaults are rising and confidence is slipping, investors are heading for the exits. Funds including Barings, KKR, Apollo, Blue Owl, Ares, and BlackRock have capped or limited withdrawals in parts of their private credit platforms after elevated redemption requests, with billions of dollars in withdrawal requests now stuck behind fund gates:

If investors and fund managers are forced to raise cash by selling more liquid credit exposures tied to the same risk bucket, the underlying of the security I’m writing about could come under even greater pressure, increasing the potential payoff of the hedge.

Likewise, if higher war-related spending and higher oil prices increase inflation and push interest rates higher, that would be another negative for this security and another way for the hedge to work. In other words, they offer several ways to “win” by hedging against multiple major risks at once, at an ultra-low price.

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence.

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Also, most weekday mornings, I share updated thoughts on the oil market and relevant overnight news via the chat, and I answer questions directly there, subject to my availability throughout the day.

So far, every Bison Insights idea has generated positive returns since publication, and 10 of the 12 have outperformed the energy sector as measured by the XOP Oil & Gas ETF since publication:

Note: Past performance may not be indicative.

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Before the conflict, the oil market was tightening — I originally wrote about that in Oil Geopolitical Risk, Surprising Positive Oil Fundamental Data, Ideas with High Oil Price Upside. I highlighted that oil demand was continuing to grow, but that OPEC spare capacity depletion and several years of lower oil prices had pushed the U.S. rig count steadily lower.

This reduced investment had begun to show up in official supply forecasts. In its February outlook, released before the war, the EIA projected that U.S. oil production would begin to decline. Since then, after the sharp increase in oil prices, the EIA has raised its production outlook:

But this updated view assumes that producers will add drilling rigs, which they haven’t actually done yet. In fact, U.S. oil rig counts have hardly budged and remain at a multi-year low:

Why haven’t producers responded to higher prices with more drilling rigs? What will happen to oil equities if the Strait remains closed for much longer? What if the Strait reopens soon and oil prices crash?

In this article, I examine these questions and their implications for the producers and oilfield services companies I’ve discussed on Bison Insights. These ideas have performed well so far, and they potentially have lots of room ahead to run:

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence.

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The basic thesis is straightforward: owning an undervalued DJ Basin producer with substantial reserve value and cash flow potential, with a stock price crushed by management issues and legacy financing issues - at a time when those issues may be fading into the rearview mirror.

The financing issues included a punitive Series F preferred financing with strong holder protections, including conversion rights and a large warrant package that threatened substantial dilution to the common equity. These issues have driven substantial share price underperformance:

In my view, that stock price underperformance has been excessive — Prairie now trades at a very low valuation relative to its reserve value and cash flow:

With that in mind, I followed up my original write-up with “Catalyst Days Away in a Distressed Oil Stock with 10x Potential Upside,” where I analyzed the possible refinancing outcomes for the Series F preferred and what each could mean for the stock price.

One day after I published that piece, the company announced an extension of the warrant issuance deadline for the Series F preferred to April 7, 2026, postponing final clarity on how that overhang will be resolved.

While that extension delayed the catalyst, the company’s annual results, released yesterday, offered an important reminder of the value that sits underneath the capital structure overhang. In the report, Prairie reaffirmed its PV-10 reserve value at approximately $1.2 billion, which after subtracting net debt, implies an equity value roughly 350% above the company’s current market cap (which importantly does not incorporate recent much higher oil prices):

In the update below, I walk through my updated view on the annual results and recent earnings call, and how I think the stock may trade after the announcement of Prairie’s final Series F outcome.

Disclaimer: I and funds I advise own Prairie Operating shares and related securities and may buy or sell them at any time without further notice. This is for informational and educational purposes only and is not an offer, solicitation, or investment recommendation. There can be no assurance of return or accuracy, and past performance may not be indicative. Please do your own diligence and consult an advisor if appropriate.

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I referenced the most recent Bison Insights sale email:

and the great performance most Bison Insights ideas have achieved so far, on an absolute basis and vs the oil & gas ETF XOP:

Let me know what you think!

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Disclaimer: This is for informational and educational purposes only. This is not an offer of securities, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance may not be indicative.

One idea in particular stands out.

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On Tuesday, I published a scenario analysis update on a distressed oil & gas company that is expected to report annual results this coming week. In that update, I outlined a range of potential outcomes and highlighted that, in a sustained higher oil price environment, the upside to net asset value becomes tremendous:

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What makes the setup especially interesting is the timing. This is not a situation where investors need to wait months for the thesis to begin playing out. Greater clarity on the company’s capital structure and overall path forward should arrive within days when it releases its annual report, and I plan to provide another update to paid subscribers shortly after.

In total, I’ve released twelve investment ideas so far on Bison Insights, all of which can be accessed in the article directory. A few have been exceptional, most have outperformed, and some still have huge potential upside to higher oil prices:

To access all twelve ideas, along with follow-up updates, C-suite interviews, and future research, you can subscribe below. I’m currently offering 30% off Bison Insights, locked in for as long as you remain a paying subscriber. This offer expires at the end of the month:

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I’ve been gradually increasing the price of Bison Insights as I release more ideas and provide more follow-up analysis, which gradually increases the value of the publication, so this may be the lowest price available going forward.

With oil now above $100 and several asymmetric energy ideas still offering substantial upside if prices remain elevated, this remains an opportune time to subscribe and gain a deeper understanding of the opportunities I find most compelling.

Disclaimer: This is for informational and educational purposes only. This is not an offer of securities, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance may not be indicative.

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Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance may not be indicative.

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Next week, the company is expected to announce the outcome. The fundamentals suggest that downside may already more than priced into the stock, while a constructive resolution could drive substantial upside:

The asymmetry becomes even more compelling when I consider the company’s leverage to higher oil prices. In a sustained higher oil price environment, which becomes increasingly likely the longer the Strait of Hormuz remains effectively shut and global inventories draw down, the company’s reserve value substantially increases, amplifying the upside if the capital structure is resolved favorably:

What makes this stock especially interesting is the timing — this isn’t a situation where investors need to wait months for the thesis to play out. We should know within the next week.

It’s a near-term binary setup, but one where the equity already trades below what even the potential downside outcome appears to be worth on a fundamental basis - which makes it compelling to me.

In this article, I walk through each scenario and analyze how I think the stock may trade under each outcome.

Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance may not be indicative.

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Since I published this idea, the stock has meaningfully outperformed the broader oil and gas market, as measured by the XOP ETF:

Despite this strong performance, I think the stock is still deeply undervalued. I don’t think the market is incorporating the upside potential from a development project that could nearly double the company’s oil production by the end of the decade, as highlighted in the CEO’s update.

In addition, the company is nearing completion of power infrastructure projects that will benefit from surging electricity demand driven by the AI data center boom. Similar projects have already doubled in value over the past year per third party analysis. Values are expected to continue rising as electricity demand continues to increase.

To evaluate this company’s upside in a sustained higher oil price environment, I looked at the company from two valuation perspectives.

First, on a cash flow multiple basis, using the company’s projected cash flow under a range of development scenarios:

Second, on a net asset value basis, incorporating the value of the base business, development project, and power generation assets:

Despite these two significant catalysts, the stock trades roughly in line with peers on the value of its base business, leaving the upside from both of these developments “free” for investors today, with huge upside in a sustained higher oil price environment. A large share buyback program could amplify this potential upside to 10x or more over time, and even more upside from the price at the time of the initial idea publication.

The full executive video update is linked below.

Disclaimer: This is for informational and educational purposes only. This is not an offer of securities, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance may not be indicative.

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