US oil and gas rig count up 3 at 288, but Permian declines extend: Enverus

The US oil and gas rig count climbed three to 288 in the week ended Aug. 12, rig data provider Enverus said, as drilling activity continued to show signs of stabilizing amid a steady oil price recovery.

The number of oil-focused rigs climbed two on the week to 200, while the number of rigs active chasing gas was up one at 88.

The week-on-week increase erased a three-rig decline during the week-ended Aug. 5 and provides further evidence nationwide rig counts have bottomed amid a recovery in global oil prices. Front-month NYMEX WTI, which fell into negative territory as recently as April, settled at a five-month-high $42.67/b on Aug. 12.

Notably, rig counts were flat to lower across most of the major named basins.

In the West Texas Permian Basin, rig counts fell two on week to 129, putting the number of rigs active in the basin at the lowest since 2008, according to S&P Global Platts Analytics. Eagle Ford operators idled one rig, leaving a total of 10 active in the play.

The SCOOP-STACK rig count was down two for a total of nine, and the Utica shale rig count was down one on the week at seven.

Rig counts in the Bakken, Denver-Julesburg, and Marcellus shale plays were each flat on the week at 11, six, and 25, respectively.

Only the Haynesville shale play showed an uptick in drilling activity last week, with operators adding two rigs for a total of 35. The addition put the Haynesville rig count at the highest since the week-ended April 15.

Crude output declines

While rig counts have broadly stabilized in recent weeks, US crude production continues to see headwinds. Output fell to 10.7 million b/d in the week ended Aug. 7, down 300,000 b/d from the week prior, according to US Energy Information Administration data. Output was the lowest since the week ended June 12, when Gulf of Mexico operators shut in more than 34% of oil production ahead of Tropical Storm Cristobal.

A sustained recovery in US crude production is likely to see headwinds this year, even as resurgent oil demand has pushed prices to near pre-pandemic levels.

While many large US producers are in the process of returning the bulk of production curtailed during the height of the COVID-19 spring lockdowns, many said in their second-quarter earnings presentations they would remain disciplined for the second half of the year and expect little change in spending until they are more certain of an economic recovery.

EIA, in its monthly Short Term Energy Outlook released Aug. 11, revised its 2020 forecast for US oil production to 11.26 million b/d, down 370,000 b/d from the previous month's outlook, citing more extensive curtailments than previously estimated.

Election risks spur drilling demand

While many US oil and gas producers have slowed drilling to a bare minimum in response to low prices, operators holding federal permits have kept actively drilling wells ahead of an expected ban if presumptive Democratic presidential nominee Joe Biden wins November's election.

US oil wells drilled on federal lands surged to 22% of total wells drilled in June, up from 12% in February, according to S&P Global Platts Analytics.

Biden has said he would halt issuing new federal drilling permits, meaning operators could continue to bring drilled-but-uncompleted wells (DUCs) into production. He has not gone as far as many of his former Democratic challengers in promising to end drilling on federal lands completely or impose a national fracking ban.

However, Senator Kamala Harris, whom Biden named as his running mate Aug. 11, has embraced harsher measures to limit US oil and gas production. Harris' climate plan mentioned closing the 2005 so-called "Halliburton loophole" that exempts fracking from federal oversight under the Safe Drinking Water Act.

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