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US oil, gas rig count rises by 5 to 840; Permian count hits pre-holiday level

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US oil, gas rig count rises by 5 to 840; Permian count hits pre-holiday level

The U.S. oil and gas rig count rose by five to a net 840 on the week, rig data supplier Enverus said Jan. 16, with the Permian Basin recovering to pre-holiday activity in the new year.

A seven-rig gain in the number of gas-directed rigs nationwide, to a total of 160, outpaced a two-rig decline in the oil count to 678.

Rigs working in the Permian Basin of West Texas/New Mexico, the largest oil-producing area in the U.S., were up by four on the week to 407, the highest total since mid-November 2019.

Also gaining four rigs, for a total 38, was the Marcellus Shale, largely sited in Pennsylvania. The chief gain came from the dry Marcellus, up three to 18, with the wet Marcellus up by one rig to 20.

Interestingly, the U.S. horizontal rig count was up by 20 to a total 736 versus the vertical tally, which was down by 15 on the week to 58, said Bob Williams, Enverus' director of content.

"The strong start in horizontal wells indicates bigger independents and majors are starting off the year with relative confidence," Williams said.

Moreover, nationwide permits approved rose by 152 on the week to 591, with the largest change coming from the Permian, up 94 to 253. Another sizable jump came from the Haynesville Shale, where permits jumped up 24 to 36.

The total domestic rig count fell to 900 or below since October 2019 and has been at 860 or below since early December 2019 as capital budgets wound down for the year. U.S. oil prices similarly wobbled in the low $50s per barrel and later the high $50s per barrel, respectively, around the same time frames.

Visibility on 2020 activity is expected Jan. 17 as fourth-quarter 2019 earnings kick off for oilfield service companies, with Schlumberger Ltd. reporting, followed by Halliburton Co. on Jan. 21.

The services and equipment providers, usually the first to provide a glimpse each quarter into what the next six to 12 months hold for the oil patch, could project some welcome news for the U.S. drilling landscape, according to investment bank Tudor Pickering Holt & Co.

"Some of the anecdotal data points we've gleaned recently from our oilfield service friends in the field suggest that first-quarter 2020 U.S. well completions activity is off to a surprisingly solid start," Tudor Pickering analysts said in a Jan. 16 investor note.

Top executives at oil and gas companies continue to message capital austerity. S&P Global Platts Analytics said in a Jan. 16 report that it sees decreased growth for U.S. shale oil this year by a third, to an increase of 800,000 barrels per day in 2020 versus 1.2 million bbl/d in 2019.

There are factors that also support growth, such as well outputs. Initial production rates for wells in the Permian and the Bakken, mostly in North Dakota, continue to rise at a "solid rate," although they are slowing in the mature Eagle Ford Shale play of South Texas, Platts Analytics said.

"Unless oil prices increase significantly in 2020 (not our most likely event), we expect growth to stay depressed by continued capital discipline," Platts Analytics said.

Costs are relatively flat, which yield "advantageous" well breakevens around $40 per barrel of West Texas Intermediate, comparing favorably to Platts Analytics' average 2020 WTI price forecast of $59/bbl of WTI, it added.

WTI crude averaged $58.54/bbl this week, down $3.42, while WTI Midland averaged $59.36/bbl, down $3.38. The Bakken Composite price was $52.54/bbl, down $3.65.

For rigs chasing natural gas, Henry Hub prices averaged $2.05/MMBtu on the week, down a penny, while at Dominion South the average price was $1.71/MMBtu, up a penny.

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Starr Spencer is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.