US oil, gas rig count jumps 7 to 567 amid buoyant $70/b crude prices: Enverus

The US oil and gas rig count jumped 7 to 567 in the week ended June 16, Enverus said, as crude demand continued buoyant and pushed prices above $70/b for a solid week.

Natural gas rigs working in domestic fields surged by six to 135, while oil rigs were up one to 431.

But the trend of gas gains was not reflected in the gas-weighted fields of the Marcellus Shale, mostly sited in Pennsylvania, where the rig count was unchanged at 35 for the week, or in the Haynesville Shale of East Texas/Northwest Louisiana, where the rig count was down one, leaving 52.

The largest change in rig counts came from the Eagle Ford Shale of South Texas, which gained four rigs, for a total 41.

The giant Permian Basin of West Texas/New Mexico was down one rig on the week, leaving 252. The play is the largest oil reservoir in the US, with about 4.6 million b/d of current crude production, according to US Energy Information Administration figures.

"It is fair to assume that higher oil prices could lead to more rigs, but it's more about the long-term trend," S&P Global Platts Analytics analyst Taylor Cavey said. "Operators are nimble, but likely not enough to go well above and beyond their current plans in the near term. We're forecasting prices to peak in July with summer demand and dwindle thereafter."

Other large domestic basins barely changed this week. Gaining one rig were the DJ Basin, largely located in Colorado, and the Utica Shale, mostly sited in Ohio, making totals of 16 and 11, respectively.

Basins which registered no change in rig counts were the SCOOP/STACK of Oklahoma and the Bakken Shale of North Dakota/Montana, leaving totals of 24 and 19, respectively.

Staying disciplined

Operators thus far are sticking to a capital discipline mindset, as they have throughout the pandemic, Cavey noted.

"Private E&P companies could swing the needle to some extent ... although we're finding they also need to show some discipline in the grand scheme of things," he said.

With WTI prices around $70/b, Evercore ISI analyst Stephen Richardson said he is now more confident the US energy industry is running "materially" below maintenance, or stay-flat, activity levels.

"While $60/b -plus WTI [prices are] likely to encourage growth in 2022 volumes, the industry is on a trajectory with a number of constraints (less efficiencies, more cost inflation) that should keep things in check," Richardson said in a June 14 investor note.

Evercore believes US oil supply for year-end 2021 should settle around 11.3 million b/d, and another 77 domestic horizontal oil rigs will be needed to stabilize US supply growth in 2022 based on its estimates.

This week, Enverus counted US horizontal rigs at 440, down two. Of these, 319 were horizontal oil rigs, down eight on the week.

Moreover, "we should expect another 45 adds to support our baseline expectation of 560,000 b/d oil supply growth," Richardson added.

Oil and gas prices were up for the week ended June 16, according to S&P Global Platts.

WTI prices averaged $71.27/b, up $1.74 week on week; WTI Midland averaged $71.55/b, up $1.76; and Bakken Composite averaged $69.11/b, up $1.69.

For gas, Henry Hub prices averaged $3.21/MMBtu, up 18 cents; and Dominion South averaged $2.07/MMBtu, up 8 cents.

Frac fleets up 6

The Primary Vision US hydraulic fracturing fleet numbered 230 for the week ended June 11, up six on the week.

Lynn Helms, North Dakota's top government oil regulator, said frac crews have been limited in the state in recent weeks, which could slow the state's drilling recovery despite a rising rig count. But there is not a general US frac crew shortage, Platts Analytics analyst Nathan Hasbrook said.

Two years ago, 450 domestic frac crews were active, and 300 were active when the pandemic hit in March 2020. Hasbrook noted: "With high oil prices and companies willing to pay more for frac services, there is room for more frac crews to come back to the market."

The US rig count is down 34% versus pre-pandemic levels, while frac crews are down 25%, he said. Frac crews did not decline as much as rigs did early in the pandemic, Hasbrook said, but "they have been steadily rebounding ever since."

While over the last couple of months the pace of frac crew adds has slowed, for the rest of 2021, rigs and frac crews will likely continue to rise but increase at a slower pace, Hasbrook said.