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US oil, gas rig count rises by 1 to 841: Enverus

Highlights

Permian accounts for bulk of increase

Waha hub gas slides into negative territory

Oil, gas prices decline on week

Denver — The US oil and gas rig count increased by one week on week to 841, according to data by Enverus, with the oil-rich Permian Basin accounting for the bulk of growth even though gas prices in the region have reached negative territory.

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The Permian continues to house the vast majority of US rigs, at 410 as of Wednesday, January 22. The rig count there was up three on the week. The Denver-Julesburg saw a gain of two rigs to 26, rig totals in the Eagle Ford were flat at 83 for the second straight week and the SCOOP-STACK count was unchanged at 44.

The uptick in Permian activity continues despite gas prices at the Waha hub being so low many operators are either burning some of the associated product or paying more to ship it to markets than it is worth.

Waha futures settled in negative territory for the first time this year Tuesday, at minus 2 cents/MMBtu for April, on concerns about gas pipeline takeaway constraints this year.

While futures contracts at Waha did settle in negative territory on multiple occasions last year, this year's negative settlement came roughly two months earlier than the first negative settlement in 2019, which was also for the April contract.

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The low prices are a result of mounting concern about the Permian's ability to either absorb or export the growing natural gas production in the region. S&P Global Platts Analytics sees Permian gas output growing slightly above last year's 2 Bcf/d due to oil takeaway capacity out of the basin no longer being constrained.

With no additional pipeline takeaway capacity forecast to enter service this year, Waha prices are gearing up for a similar, if not more intense, negative pricing environment throughout 2020.

Oil and gas production in the Permian continue to grow despite a year-over-year decline of 81 rigs. After averaging 4.2 million b/d of oil output in 2019, Platts Analytics expects the basin to average 5 million b/d in 2020.

Rigs totals in most of the other major basins moved little on week. The Marcellus Dry saw rigs increase by one to 19, totals in the Marcellus Wet (20) and Williston (55) were unmoved, and both Haynesville (45) and Utica (11) shed one rig.

The rig count outside the major basins fell by three to 128.

PRICES DIP

Oil and gas prices showed a uniform decline on the week.

For oil, WTI was down 53 cents to $58.01/b, Bakken Composite dipped 55 cents to $51.99/b, and WTI Midland dropped 59 cents to $58.77/b.

For gas, Dominion South was down 5 cents to $1.66/MMBtu, and Henry Hub dipped 6 cents to $1.98/MMBtu.

PERMIT NUMBERS SLIDE

The number of drilling permits either applied for or received has slowed in recent weeks, particularly in the Williston, where permits fell from 18 the prior week to just one. Such a drop in permits is normal for the Bakken play in North Dakota as drilling during the most frigid months of the year can increase costs and difficulty.

Nationwide permit totals fell 97 on week to 500. Permits fell in the Permian by 85 to 256, Haynesville by 26 to 10 and Denver-Julesburg by 21 to 2.

The Eagle Ford saw permits rise by 20 on week to 62, and permits in the Marcellus Dry grew from zero to 10.