US oil, gas rigs fall by one on the week to 413, as Permian at highest level since May

The US oil and gas rig count decreased by one on the week to 413, rig data provider Enverus said Dec. 24, while Permian Basin rigs reached a level not seen in seven months.

The decrease was from gas-directed rigs, which fell by one to 113 while oil rigs remained at 300 for a second straight week. The oil rig count has not been above 300 since late April 2020.

“Typically, the industry experiences weather impact and seasonality around the holidays, but this year the rig count has continued to increase” with the exception of the current week, Evercore ISI analyst James West said in a Dec. 24 investor note.

Since the first week in November, the rig count has risen 15% from 359.

Additional coverage

The Permian Basin of West Texas/New Mexico was the week’s clear winner in rig gains, up by three rigs to 184, its highest level since May 2020.

Since its late-August 2020 trough of 127, the Permian rig count has added 57 rigs and climbed 45%.

But the quieter SCOOP-STACK play in Oklahoma also rose by three rigs on the week to 16, the highest it has been since April 2020.

Other basins mostly either shed rigs or were stable week on week. However, the Marcellus Shale sited largely in Pennsylvania and surrounding states, gained one rig, for a total 31.

Bakken, DJ, Eagle Ford lose rigs

But the Bakken Shale mostly in North Dakota and the DJ Basin in Colorado, lost one rig apiece, for totals of 12 and eight respectively. The Eagle Ford Shale of South Texas lost two rigs, leaving 30.

Basins that posted no weekly change were the Haynesville Shale of East Texas/Northwest Louisiana, at 46 rigs, and the Utica Shale mostly in Ohio, at six.

This year, the oil an gas rig count dropped off steeply starting in March 2020 owing to the pandemic that also caused a sharp falloff in oil prices. The rig count plummeted nearly 70% by early July, reaching a trough of 279 before it began to turn up.

Since then, rigs have since recovered steadily as operators, many of which had decreased activity and voluntarily curtailed production for two or three months at midyear, sought to 2020 hold their production at least flat or with a slight increase and position themselves for renewed activity in 2021.

“The rig count recovery continues to exceed our expectations,” said West. “There is visibility for the rig count to continue to grow through first quarter [2021], especially if WTI is in the $50s” per barrel.

WTI has been in the $48/b range during the last couple of days, but has generally been in the $40/b or greater range since late June.

This week, commodity prices rose both for oil and gas.

Weekly average prices rise

WTI averaged $48.02/b for the week, up 86 cents, while WTI Midland averaged $48.93/b, up 73 cents, and Bakken Composite, $44.75/b, up 80 cents.

Natural gas prices also rose. At Henry Hub they averaged $2.70/MMBtu, up 11 cents, and at Dominion South, $2.18/MMBtu, up 18 cents.

While upstream operators have remained disciplined despite rising prices, it remains to be seen if oil executives who are currently planning next year’s capital budgets will slightly kick up the level or remain committed to relatively flat activity at levels below $50/b.

“We have seen consistent outperformance in the oil rig count since the beginning of Q4,”, when it rose from 228 the first week of October to the present level of 300, or more than 30%, analyst Jacob Lundberg of Credit Suisse said in a Dec. 23 investor note.

Since the oil rig count bottom of 191 in early July, it has risen well over 50%.

“We do not see a meaningful reversion in the trend of oil rig outperformance,” Lundberg said.

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