US oil, gas rig count leaps 30 to 491 on week, as oil prices climb further: Enverus

Houston — The US oil and gas rig count leaped 30 in the week ending March 3 to 491, rig data provider Enverus said, reaching the highest total since late-April 2020, as WTI oil prices climbed near the mid-$60s/b amid buoyant outlooks at major energy conferences.

Oil-directed rigs accounted for the vast majority of the week's gain, rising 27 to 366, while rigs chasing natural gas grew three to 125.

The Permian Basin, sited in West Texas and Southeast New Mexico, was the clear focus area for growth, with a weekly increase of 12 for a total 222. Rig totals in the Permian are now at the most since late-April 2020.

"While on paper this looks like a massive week-on-week gain, generally speaking, it was a large recovery that was needed after two straight weeks of flat rigs for US shale," S&P Global Platts Analytics analyst Andrew Cooper said.

The week's large jump may have been an "accumulation" from slowdowns the past few weeks because of the winter freeze that struck the US in mid-February, with rigs finally mobilized to the field after delays, Platts' Analytics analyst Parker Fawcett said.

The freeze hit the Permian and Eagle Ford Shale in South Texas particularly hard. At peak, up to 4 million b/d of the US' total 11 million b/d of oil production was offline, although most of it was quickly restored within a few days.

"I'd expect the next few weeks to return to more steady additions like we've seen the past few months," Fawcett said.

Constraint continues

At the annual CERAWeek by IHS Markit energy conference this week, enthusiasm for the future of upstream oil and gas in the next two decades was evident, despite what many believe will be a steadily growing use of renewable and alternative energy sources by mid-century; a move even oil and gas producers have begun to embrace.

For the time being, upstream players have repeatedly renewed their vows not to contribute to supply-demand imbalances. At CERAWeek, they repeated they will stick to austere capital budgets and growth targets of 5% or less per year and return sizeable amounts of cash to shareholders, while continuing to cut costs, improve efficiencies and seek ways to reduce their carbon footprints.

Oil prices that have topped $60 WTI in recent weeks served as backdrop for talk at the conference, with chatter that a year of under-activity in 2020 could push prices even higher in the next 18 months or so.

"If you start getting into the prices that proponents are mooting like $70/b to $75/b oil, you can return both an enormous amount of money to shareholders and have very strong [production] growth," IHS Markit analyst Raoul LeBlanc, vice president for North American unconventionals, said during a CERAWeek panel.

He noted that while the former is valued by investors currently, growth, at least strong growth, is not.

LeBlanc said producers will almost certainly continue with austere programs in 2021, but suggested next year, if prices climb further, their appetite might overcome their will power.

WTI averaged $61.35/b in the week ending March 3, up 13 cents week on week, according to S&P Global. WTI Midland averaged $62.28/b, down 8 cents, and Bakken Composite averaged $60.40/b, up $1.04.

Natural gas settled lower as prices continued to stabilize following the impact of the US freeze. Henry Hub prices averaged $2.74/MMBtu, down $1.43 on week, and Dominion South averaged $2.32/MMBtu, down 58 cents.

'A little more juice' at $50/b-plus oil

In the meantime, oil producers are enjoying the ride amid higher revenues, and some continue to add rigs. In the past week, the largest domestic fleet add came from Occidental Petroleum, which picked up two rigs, pushing its count to 15, Cooper said.

"Independents are still at it," Stephen Richardson, an analyst with investment bank Evercore ISI, said in a recent company podcast. "There's a little more juice in the system at $50/b-plus. We don't think you'll see either market support or industry support for any material growth" in oil production.

DJ, Haynesville see gains

Outside the large gain in the Permian, most of the eight largest domestic basins gained rigs on week, with two holding steady, Enverus data showed.

The DJ Basin of Colorado and the gas-prone Haynesville Shale picked up three rigs each. That brought the Haynesville to 47 and the DJ to 14, a level the latter basin has not seen since mid-April 2020.

In addition, the Eagle Ford and the Utica Shale, a largely gas/liquids play mostly in Ohio, picked up two rigs each for respective totals of 37 and 12. It is the highest tally for the Eagle Ford since mid-April 2020, while the Utica has now broken out of its stagnant range of eight to 10 rigs so far this year.

The SCOOP-STACK play in Oklahoma rose by one for a total of 17.

The Marcellus Shale, largely in Pennsylvania, and the Bakken Shale, mostly in North Dakota, saw no change on the week. That kept the Marcellus total at 34 and the Bakken at 14.