US oil, gas rig count plunges 74 to 567 on week as output cuts continue: Enverus

The US oil and gas rig count plunged by 74 to 567 the week ended Wednesday, rig data provider Enverus said, as capital budget and activity cuts announced recently by upstream operators continued to silence once-busy oil fields.

Oil rigs accounted for the bulk of the decline, falling 67 to 444, while rigs chasing natural gas slid by seven to 123.

The rig count has plummeted in large chunks during the last few weeks as the impacts of sharply reduced global oil demand and resulting low crude prices owing to the coronavirus pandemic have devastated the industry landscape.

For the last two days, NYMEX WTI crude futures settled below $20/b.

Last week, the rig count took an 80-unit skydive, leaving 641 rigs. Since mid-March, the US rig count is down nearly 250 rigs, or 30%.

The sharp decline in rig counts has occurred as E&P operators have volunteered to temporarily shut in some of their production after cutting capital budgets as much as 50%.

The biggest such announcement was made on Thursday, as ConocoPhillips said it would voluntarily curtail 225,000 b/d of gross production in the US and Canada.

PRIVE E&P RIG COUNTS DOWN 35%

"The latest data reinforces the notion that while the ongoing collapse of the oil and gas industry is hurting everyone, size still matters," Bob Williams, Enverus' director of content, said.

"Our tally shows that since mid-May, the private independents' count of active rigs running has plunged by 35%, while the majors' operated fleet has dropped by 20%," Williams said. "Commonly, when oil prices are stable, the private independents have a roughly 3:1 ratio of active rigs vs. the majors. That has shrunk to 2:1."

By individual plays, the Permian Basin of West Texas/New Mexico accounted for the single largest volume of released rigs for the week ended Wednesday, falling 32 to 302.

The Eagle Ford Shale, of South Texas, dropped 12 rigs during the same period, leaving 46; while the DJ Basin of Colorado slipped five to 14.

Both the Bakken Shale of North Dakota/Montana and the SCOOP-STACK play of Oklahoma lost four rigs each, for respective totals of 37 and 22.

CALL FOR MORE PRODUCTION CUTS

Analysts and other observers say millions of barrels per day more of production cuts are needed to have an effect on prices.

On Tuesday, the Texas Railroad Commission held a live-streamed public hearing to discuss prorationing, or state-mandated cuts for producers in the state. At issue was a 20% cut for large and midsized operators; small producers with less than 1,000 b/d of oil output would be exempt.

The hearing ended with no definitive action and no timeline for a decision.

During his testimony Tuesday before the Commission, Pioneer Natural Resources CEO Scott Sheffield, citing research by Rusty Braziel, founder of energy consultancy RBN Energy, said the breakeven cost of most Permian independents is about $25-$26/b.

"But we need $30/b to survive," said Sheffield. "At $20/b, you'll have 80% bankruptcies and 250,000 employees laid off, but $30/b is what I call we're crippled. But at least industry will survive waiting until the virus ends and demand picks up by the end of 2021."

For now, oil prices remain low and volatile, at levels not seen in 20 years.

During the past week, WTI has averaged $21.29/b, down $4.40, according to S&P Global Platts Analytics, while WTI Midland averaged $18.61/b, down $1.44.

The Bakken Composite price was $17.13/b, up 28 cents.

Gas prices were more stable, with Henry Hub prices averaging $1.71 /MMBtu on the week, up 9 cents, and Dominion South prices averaging $1.41/MMBtu, up 7 cents, Platts Analytics said.