US oil, gas rig count rises 1 to 396 as adds in domestic plays slow: Enverus

Houston — The US oil and gas total rig count rose by one in the week ending Dec. 2 to 396, rig data provider Enverus said, with totals reaching close to half the pre-pandemic levels of early March and more than 40% higher than it was in the July trough.

The net one-rig add came from the natural gas side, as gas rigs rose by five to 110, while oil rigs fell by four to 286.

The slight week-on-week rise showed a slowing of recent drilling activity, as the count has risen in recent months often by double-digits per week, with upstream operators attempting to shore up falling production from activity cutbacks earlier in the year when the pandemic caused a massive plunge in oil prices.

The total US rig count is inching closer to 50% of mid-March levels following recent weekly gains, Platts Analytics noted in a Nov. 30 Spotlight report.

Mid-March 2020 was the start of the large weekly tumbles in domestic rig counts. From levels of 835 at the time, the rig count plummeted 67% in four months.

Since the early July trough of 279, the rig count has gained 117 rigs.

Although the rig count uptick appears to have quieted in advance of the December holiday season, activity could "pick back up after the new year and into February," S&P Global Platts Analytics analyst Matt Andre said.

Big US unconventional producer EOG Resources was the biggest mover this week, adding five rigs, Andre said.

Gas rigs near 90% of mid-March levels

"Rigs in top gas plays have returned to about 90% of the mid-March count," the Spotlight report said of plays such as the Marcellus Shale, the Haynesville Shale and the Utica Shale. "However, rigs in top oil basins, which experienced a sharper decline and slower recovery, remain at about 40% of mid-March levels."

Gas prices grew in the week ended Dec. 2, with Henry Hub prices averaging $2.79/MMBtu, up 55 cents, and Dominion South at $1.95/MMBtu, up 58 cents.

Average horizontal rig activity, typically employing rigs in unconventional basins with more-productive wells, is now on pace to finish more than 25% higher quarter on quarter, investment bank Tudor Pickering Holt said.

While this week's one-rig gain wasn't necessarily impressive, the 13-rig jump the previous week was significant, TPH said in a Nov. 30 investor note.

During the week ended Nov. 25, the rig count gained 13, mostly from the Permian Basin in West Texas and New Mexico, while the horizontal rig count jumped 16. For the week ended Dec. 2, the horizontal rig count rose another seven to 323.

"Importantly, last week's gains were fairly evenly distributed between both public (up nine week on week) and private operators (up 10 week on week), with private operators still accounting for a record 44% share of the market," the bank said.

Two basins gain rigs

Within individual basins, two of the eight largest basins Enverus tracks gained rigs during the week ended Dec. 2. The Eagle Ford Shale of South Texas rose by two rigs to 31, while the SCOOP-STACK of Oklahoma gained one rig, for a total of 14.

Three other basins lost one rig apiece. That left the Haynesville Shale of East Texas/Northwest Louisiana with 46 rigs, the Marcellus Shale largely in Pennsylvania with 25 and the DJ Basin of Colorado at nine.

Three other basins—the Permian, the Bakken Shale mostly in North Dakota and the Utica Shale mostly in Ohio—remained stable week on week. As a result, the Permian remained at 176 rigs, the Bakken at 13 and the Utica at seven rigs.

EOG's five-rig add was spread across several basins: two in the Delaware Basin in New Mexico, two in the Powder River Basin of Wyoming, and one in the Eagle Ford. But the company has added significantly to its rig count in the last few months.

For example, it had four rigs in the New Mexico Delaware Basin in mid-September but had 11 during the week ended Dec. 2. In the same time period, it went from two in the Eagle Ford to six. In the past four weeks, the company has nearly doubled its rig count in all those basins, leaping from 12 in early November to 23.

"We entered the year so hot with activity ... we [recognized we] were going to have to pull back pretty aggressively" as oil prices fell in March through May, Ezra Yacob, executive vice president of exploration and production, said at the Bank of America/Merrill Lynch Global Energy virtual conference in mid-November.

"But [we also believed we later] would have an inevitable ramp-up, trying to get back up to that maintenance-kind-of rig level numbering in the low 20s," Yacob said. "I think everybody can see that we're starting to pick up rigs here in the fourth quarter."

WTI went from $46/b in early March to the $20s and even teens in the next couple of months. But since late June, the price has hovered around the $40s/b level and in the last seven trading days has been in the mid-$40s/b.

Oil prices have recently strengthened. For the week ended Dec. 2, WTI averaged $45.06/b, up $1.65 on week, WTI Midland averaged $45.76/b, up $1.92, and the Bakken Composite price averaged $42.03/b, up $1.36.