US oil, gas rig count rises by 6 to 430 amid more 2021 visibility

The US oil and gas rig count rose by six to 430 in the week ending Jan. 20, rig data provider Enverus said, as indicators ahead of the quarterly round of upstream earnings calls telegraphed an improved activity outlook for 2021 based on higher oil prices and possibly higher capital spending.

Permian Basin rigs in West Texas and New Mexico rose by four to 194, continuing their upward march since the August trough of 127. The count in the giant basin is the highest since May 2020, when the entire US fleet was plunging rapidly due to low oil prices brought on by the spreading pandemic.

The US horizontal rig count remained at 355 on the week, but that figure is also the highest since May. The nationwide oil rig count rose by 11 to 318, the highest since April 2020, while rigs chasing natural gas were down by five to 112.

The recent swell in rig counts is likely related to the return from holidays and the start of 2021 operator budget plans, analysts said.

Rig totals in the Eagle Ford of South Texas were down five to 28, with numbers falling in the dry gas western pocket of the region, said Andrew Cooper, an analyst with S&P Global Platts Analytics.

“Operators like EOG are saying the heightened gas price made some of [that] acreage as profitable as the Permian,” Cooper said. But with the 12-month strip for gas continuing to fall away from the $3/MMBtu mark, Cooper said he wondered “if that is weighing on Eagle Ford operator minds.”

Operator discipline

For the week ended Jan. 20, WTI prices averaged $53.04/b, up 75 cents, while WTI Midland averaged $53.91/b, up 34 cents, and the Bakken Composite price averaged $50.10/b, up 78 cents.

But natural gas prices were down, with Henry Hub averaging $2.63/MMBtu, down 11 cents, and Dominion South averaging $2.33/MMBtu, down 4 cents.

“Oil service companies have visibility for activity improvements through February as customer budgets reset and set up their rig count and frac [units] to keep a maintenance level of production,” Evercore ISI analyst James West said in an investor note Jan 18.

“The question remains, as oil prices sit around the mid-$50s, will operators keep their discipline,” West said.

Platts Analytics in a Jan. 18 Spotlight report said its latest forecast assumes rig and frac hydraulic fracturing crews “will continue to increase in 2021, with frac crews growing faster as operators continue to take advantage of their large DUC inventory before increasing rigs at a much faster pace.”

“The recent surge in oil prices is positive for activity but unlikely to have a significant impact as operators are expected to continue to keep some capital discipline,” Platts Analytics said.

Enverus, in a late Wednesday report, said about a quarter of the roughly 100 E&P companies it tracks have posted 2021 capital budget guidance for this year, and estimates capex has decreased 3% on average versus last year. But others, including boutique investment bank Evercore ISI, found US E&Ps planned to raise capex an average of 5%. according to its annual 2021 Global Upstream Spending Outlook released last month.

In any case, it appears the capex needle will not move too much one way or another from what companies spent in 2020, when operators slashed budgets 40%-50% from original levels earlier in the year in response to low oil prices.

Federal permits jump
As the new administration of US President Joe Biden settles in, E&Ps await further detail on limits he had earlier pledged to enact for drilling on federal lands.

Well permitting on federal lands has jumped to the highest level on record in recent weeks, Platts said, with nearly 500 wells approved since the start of December, more than double the prior three-month average of 188 wells a month.

Current inventory stands at more than 3,600 approved wells, more than 60% of which are in the New Mexico Permian Basin, where permits have reached nearly 400 wells in the last six weeks, Platts Analytics said.

“The surge seen in late December has continued into the first 10 days of January,” Platts Analytics said. “US Bureau of Land Management officials could be attempting to speed up and finish processing pending permits before the switch of administration,” which occurred Jan. 20.
Credit: Platts

Gh Extractives is an independent multimedia portal that seeks to provide credible information and news content to readers especially players in the extractive sector in Ghana, Africa and beyond. It also provides a unique platform for players in the energy sector to market their products and reach a wider audience

View All Posts

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.