US oil, rig count drops 12 to 607, lowest level since 2021

The US oil and gas rig count dropped by 12 to 607 for the week ended Dec. 18, according to a S&P Global Commodity Insights analysis, the lowest level since the coronavirus pandemic levels of September 2021.

Gas-focused plays gained two rigs making 106, while oil-directed plays shed 14 rigs leaving 501 – the lowest level the oil rig count has been since June 2024, the Commodity Insights analysis showed Dec. 26.

"Overall, while we are surprised by the magnitude of declines over the past few weeks, we still have reservations about the underlying dataset as data choppiness has appeared to increase heading into year-end," investment bank Tudor Pickering Holt said Dec. 23 in its daily report to industry.

Prior to the recent round of third-quarter calls in late October/early November, it was believed that rig counts could rise a bit in the year ahead as gas drilling picked up. But in general, plans call for 2025 to largely resemble its predecessor year, analysts say.

Weak WTI prices expected for the year will keep the US oil rig count steady or in a modest decline in 2025 as operators continue to make efficiency gains, but keep net activity flat, Commodity Insights analyst Imre Kugler said in mid-December.

Gas-directed activity, a 'bright spot' in H2 2025

But gas-directed rig activity will be the "bright spot" for 2025, Kugler said, adding LNG demand should trigger an activity ramp later that year in the Marcellus Shale, Utica Shale, Haynesville Shale, and even Eagle Ford dry gas plays.

The total domestic rig count has been below 700 for more than a year, but just ended its fourth consecutive week below 620. This may be traceable to the holiday season which will occupy the next couple of weeks and is typically a more sluggish activity period as E&P budgets are nearly exhausted and Christmas-New Year absences frequent.

More recently, rig counts bounced around generally in the 630s since July. 2024 began with the domestic rig count at 677.

The 607 active rigs for the week ended Dec. 18 is the lowest the rig count has been since September 2021 -- a time when oil markets were beginning to emerge from the coronavirus pandemic.

Moreover, the "frac" or hydraulic fracturing count, was 210 for the week ended Dec. 25 -- its lowest level since April 2021.

Investment bank UBS, which held its Private + Public E&P Forum in mid-December, said key takeaways from the gathering were that rig and well completion ("frac") activity will likely remain near current levels in 2025, and that service costs are bottoming.

"On the oil side, private E&Ps are seeing similar operational efficiency gains and lower drilling and completion costs, reducing the need for rig additions to support volumes," UBS upstream analyst Josh Silverstein said in a Dec. 16 investor note. "On the gas side, private E&Ps are forecasting flat volumes in 2025 and will limit any growth until there's a demand pull scenario."

Deflation may be ending in 2025

And on service costs, "our discussions suggested the deflationary environment is coming to an end," Silverstein said. "While expiring contracts today are rolling forward at a lower rate versus six to nine months ago, participants didn't see further downside to pricing in 2025 contracts."

"This reflects the lack of available quality equipment and margins needed to support the oilfield service providers," he said

Even with the rig count at a recent low, most of the eight unconventional domestic basins tracked by Commodity Insights saw their counts rise slightly during the week ended Dec. 18.

Permian Basin rigs were up three to 285, while the Eagle Ford Shale and SCOOP-STACK plays each added two rigs, for totals of 49 and 27 respectively. And, the Marcellus Shale added a rig for a total 19.

Despite the small incremental gain for the week ended Dec. 18, Permian rigs are below the 300 level for the 13th consecutive week.

On the other hand, the Williston Basin lost six rigs on the week, leaving 34.

Three other basins were unchanged, leaving the Haynesville Shale at 38 rigs, the Utica Shale at 11 and the DJ Basin at 14.