The US oil and gas rig count increased by four to 843 on the week ended March 8, an analysis by S&P Global Commodity Insights showed, as the Permian and SCOOP-STACK each gained four rigs and natural gas-prone basins lost rigs or stood still.
The two basins' gains pushed the Permian to 362 rigs and the SCOOP-STACK to 43. But the increase in those plays and in most of the eight largest unconventional basins are on a see-saw as rig counts have bounced around within a limited range for a half a year or more.
With few exceptions, the Permian Basin has kicked up and down in the 350s-360s since mid-September 2022, while the SCOOP-STACK, except for the first week of March, has been in the 40s since late August 2022.
'Surprised' at holding pattern
"Based on what operators said on their recent Q4 2022 earnings [calls], rigs should be increasing this year," said Rene Santos, S&P Global Commodity Insights managing director of North American supply and production. "They have been pretty flat for the past six months. We expect them to start to pick up soon."
The long spate of rig-juggling with no substantive gains has also puzzled Matt Andre, S&P Global Commodity Insights' production team manager.
"We're a little surprised that we haven't seen rig activity break out of this holding pattern we've been in for the past six months or so," Andre said.
Other holding patterns have shown up elsewhere within the oil and gas industry.
For example, on March 13 the US Energy Information Administration released its monthly Drilling Productivity Report which showed the agency expects oil production to expand by 68,000 b/d of crude oil in April 2023 to 9.2 million b/d. That projected figure represents a revision of the March 2023 expectation that oil production would grow to 9.35 million b/d.
One trend that does appear to breaking out and holding fast is a small but steady build of drilled but uncompleted wells, commonly called DUCs. The current DPR showed domestic upstream companies continue to build their stockpiles of producible wells that have already been drilled and only need to be completed to be placed online.
In February, US DUCs hit 4,773, up 21 from the previous month. That is a bit less than the preceding months, when DUCs grew 35 in January to 4,752 and 34 in December 2022 to 4,717.
Before that, DUCs were being drawn down steadily through the coronavirus pandemic from a high of 8,778 in June 2020.
DUCs are sometimes deliberately "banked" during times of low oil prices when producers don't want to accept a too-low price for their oil, or simply during periods when operators want to build their inventories of available and optimal wells to choose from for their production.
North Dakota drilling to increase slowly
On March 15, the North Dakota Department of Mineral Resources said that the state's oil production climbed 11% in January to 1.06 million b/d, while natural gas output inched up 7% to 2.834 Bcf/d.
Drilling activity is expected to increase slowly over the next two years, with the rig count stalled in the mid-40s, DMR Director Lynn Helms said, with operators maintaining a permit inventory of around 12 months.
"We 're seeing some of our large operators looking at production growth in 2023," Helms said.
The state's own rig count for January showed an increase to 46 rigs from December's 44 rigs, with 45 active on March 15, DMR data showed.
The outlook for gas-directed rigs has became weaker as gas prices softened in the last six weeks amid the Q4 2022 reporting season. According to investment bank Tudor Pickering Holt, this has led to one public driller saying in early March it expected a decline of 25 to 35 rigs in Haynesville Shale activity, with only 15-20 of those rigs likely relocating to the Permian Basin.
"Our channel checks with gassy operators would suggest further rig drops outside of the basin once current term contracts expire," TPH said in its daily investor note March 16. "With WTI now below $70/b ... we see additional risk that private operators may revisit operational plans in the oily basins."