US oil, gas rig count rises by 1 rig to 457, with improved oil prices a boost to E&Ps

The US oil and gas rig count moved up one to 457 in the week ending Feb. 10, rig data provider Enverus said, as growth slowed from double-digit rig increases in the previous two weeks, even with WTI oil prices improving toward $60/b.

The week's single net rig add came on the oil side, as rigs chasing that commodity moved up three to 338, while those chasing natural gas were down two to 119.

The rig count had seen double-digits gains in four of the past nine weeks, growing by 26 over the previous two weeks, as operators added rigs to maintain production.

Nationwide rig totals have risen 64% since the early July low of 279, according to Enverus.

Among the eight largest plays for the week ended Feb. 10, the Permian showed the most change, with three rigs added for a total 208, marking the highest count for the basin since early May 2020.

Three plays added one rig: the Eagle Ford Shale (35 rigs) in South Texas, the DJ Basin (10) in Colorado and the Utica Shale (10), mostly in Ohio.

The Marcellus Shale (32) mostly in Pennsylvania, and the Bakken Shale (13), mostly in North Dakota, each shed two rigs.

Rig totals in both the Haynesville Shale (50) of East Texas/Northwest Louisiana, and the SCOOP/STACK (16) of Oklahoma were unchanged on the week.

Oil, gas prices climb

WTI oil, which plunged into the $20s/b as the pandemic took hold last March and was in the $40s/b for most of H2 2020, is now trading in the $58/b range, providing some comfort for E&P operators after a worrisome year.

For the week ended Feb. 10, WTI averaged $57.62/b, up $3.91 week on week; while WTI Midland averaged $58.54/b, up $3.96; and the Bakken Composite price averaged $56/b, up $5, according to S&P Global Platts.

Natural gas prices also fared well. Prices at Henry Hub averaged $3.29/MMBtu, up 43 cents; while prices at Dominion South averaged $3.04/MMBtu, up 45 cents.

Although commentary on fourth-quarter earnings calls seemed "restrained," in the words of one analyst, upstream executives showed a clearly optimistic attitude for the industry near term.

"The good news for the E&P upstream and its oilfield service suppliers is that operators can comfortably lock in [oil hedges at] $53/b-plus WTI through year-end 2021 and $51/b-plus for 2022," Evercore ISI analyst James West said in a Feb. 8 investor note.

Full-year "2021 upstream capex programs continue to add active rigs to the field," West noted. "US shale could revert to modest growth mode, but management teams sound particularly restrained."

Hess adds second Bakken rig

But that doesn't necessarily mean E&P operators see higher oil prices as a signal for expanded drilling. While the rig count is expected to rise this year, S&P Global Platts Analytics sees the year-end total around 630, operators will most likely continue the fiscal discipline they've become accustomed to during the last couple of years.

Still, operators could take advantage of higher prices to tweak their operations upward where it makes sense. For example, John Hess, CEO of Hess Corp., said his company recently added a second rig to the lone rig it had run in the Bakken Shale for most of the past year.

John Hess, who spoke Feb. 11 during a video interview with IHS Markit vice chairman Dan Yergin, said the second rig will allow the company's Bakken production to stay flat at 175,000 boe/d. Pre-pandemic, the company had been running six Bakken rigs, but cut back to one soon after oil prices plummeted in March.

"If we get closer to $60/WTI, we might get to four rigs, allowing us to grow the Bakken again to 200,000 boe/d, which we were at during the first half of 2020," he said.

"I really see the Bakken and the Eagle Ford staying flat for the next five years," he added.

Looking to the wider US landscape, the CEO noted at current rig counts the US could get back to the roughly 13 million b/d of crude oil it was producing at the start of 2020 by 2025-26. "That may [cause shale production] to grow 200,000-300,000 b/d a year, year in and year out," he said.