US oil, gas rig count jumps 20 to 379, with most additions across smaller basins: Enverus

Houston — The US oil and gas rig count jumped by 20 to 379 on the week, rig data provider Enverus said Nov. 12, as operators moved to shore up production profiles battered by the coronavirus pandemic's hit to oil prices and demand.

Thirteen of the 20 incremental rigs placed in domestic fields in the week ended Nov. 11 were divided among small basins rather than larger, well-known plays.

Matt Andre, an analyst with S&P Global Platts Analytics, said the relatively large week-on-week rise in rigs is "probably just operators making their best effort to offset natural declines," with most basins still "well below" the rig levels needed to keep production flat, rather than a sign of "a serious increase or trend forming."

Among large basins, the Eagle Ford of South Texas gained the most, adding four rigs for a total 27. The DJ Basin in Colorado gained two rigs, rising to eight total; while the giant Permian Basin of West Texas/New Mexico gained one, increasing to 161.

But it's difficult to assess the reasons for scattered rig adds in the smaller basins, such as the two rigs that the Louisiana Gulf Coast picked up in the past week, making a total of six, or the lone rig added in rural New York, Andre said.

He called the increase in the Eagle Ford promising, but warned most of the rig gains on week "could just be noise."

"Horizontal oil rigs in the major basins are what contribute to crude production growth, so when we see smaller areas [increase], we don't really see a trend there or an impact to production," Andre added.

Rig counts in five other large basins did not change week on week.

The Haynesville Shale in East Texas and Northwest Louisiana stayed at 42 rigs; the Marcellus Shale, mostly in Pennsylvania, was flat at 27 rigs; the Bakken Shale, largely in North Dakota, was unchanged at 14; the SCOOP-STACK plays in Oklahoma stood at 15; and the Utica, chiefly in Ohio, stayed at six.

Of the 20 incremental rigs the past week, 19 went to oil fields, bringing oil rigs to a total 271 nationwide, while gas plays gained one rig for a total of 108.

In the past two months, the rig count has gained over 30%, or about 94 rigs. It plummeted in early March from 838 to a low of 279 in mid-July, then hit two-month plateau, rising very slightly over that time.

Slashes in capital budgets and output curtailments of uneconomic wells from severely low oil prices March through May have battered US production this year, topped of by an record hurricane season that took some output down mostly in Q3. And the effects of the pandemic, which decimated global demand this year, still linger with an uncertain recovery timeline.

Oil prices up on week

Oil prices rose nearly $3/b on average this past week, according to S&P Global Platts Analytics. WTI averaged $39.81/b over the period, up $2.69; while WTI Midland averaged $40.04/b, up $2.75; and the Bakken Composite price averaged $37.10/b, up $2.77.

Natural gas prices dipped slightly at both Henry Hub, where the price averaged $2.66/MMBtu, down 23 cents on the week, and at Dominion South, where it hung at 67 cents/MMBtu, down 45 cents.

Oil has been largely rangebound around $40/b since early July, but operators need higher prices to activate meaningful activity growth, and that likely won't come until 2022, according to Platts Analytics. Platts Analytics' WTI crude price forecast does not break above $45/b until very late in 2021.

Permit activity picks up

Evercore analyst James West said in a Nov. 12 investor note that federal lands are driving permit activity ahead of the Biden Administration

US E&P operators increased permitting for the third consecutive month, with October up 19% month on month, West said, and US drilling applications accelerated 25% month on month, marking the largest monthly increase in 2020.

Joe Biden, the declared winner of a hotly fought race for the US presidency, has said he would halt new drilling on federal lands if elected. Biden's rhetoric spurred a flurry of upstream permit applications ahead of the Nov. 3 election.