Houston — The US oil and natural gas rig count rose by three on the week to 285, rig data provider Enverus said Sept. 3, as the final trimester of the year approaches with the drilling arena not showing much change.
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Two of the three rigs added in the week that ended Sept. 2 were oil-focused, as that number rose to 196. The other rig was gas-focused, for a total of 89.
The big jump for the week came from the Permian Basin of West Texas/New Mexico, which saw an increase of four rigs to 131. Both the Eagle Ford Shale of South Texas and the Haynesville Shale of East Texas/Northwest Louisiana gained one rig each, for totals of 11 and 37, respectively.
"The Permian rig additions were from larger companies that may be able to make $44/b WTI economical," Matt Andre, an analyst for S&P Global Platts Analytics, said.
EOG Resources, Occidental Petroleum, WPX Energy and QEP Resources each added a rig in the prolific basin, Andre said.
But five of the US' largest domestic plays saw no change week on week. The Bakken Shale of North Dakota/Montana still has 10 rigs, the Denver-Julesburg Basin of Colorado six; the Marcellus Shale, mostly sited in Pennsylvania, 25; the SCOOP/STACK play in Oklahoma 10 rigs; and the Utica Shale mostly in Ohio, has six.
The Texas Gulf Coast, where the count declined by three in the week that ended Aug. 26 and coincided with Hurricane Laura's landfall on the Texas-Louisiana border a day later, remains at three this week as operators continue to restore US Gulf of Mexico production.
It is still unclear if there was a connection between the storm and those onshore rigs dropped from small fields in that region. Powerful storms such as Laura, which was a Category 4 – the second highest on the Saffir-Simpson Hurricane Wind Scale – often retain their force for a time even after they move inland.
In any case, the total US rig count has bounced around since the 279 rig trough of early July and appears to be hovering in a slightly higher range.
US rig count averages 287 since July trough
Since then, the domestic rig count has averaged 287. That is down about 66% from the 838 active domestic rigs in early March, when oil prices began to drop steeply owing to the coronavirus pandemic.
Platts Analytics believes rigs will stay relatively flat through the end of 2020 and into 2021, gradually increasing in 2021 as exploration and production operators gain confidence in a higher oil price.
"Our latest forecast, which is consistent with operator guidance, assumes the rig count has reached bottom and will stay relatively flat until early 2021, as oil companies wait for several months of sustained higher oil prices before starting to gradually increase rigs," it said in an Aug. 31 Spotlight report.
"In the meantime, we expect operators to take advantage of the comparatively higher oil prices, their hedging positions and the large [drilled but uncompleted well] inventory to increase well completions," it said.
In addition, about 1.2 million b/d, of the 2.8 million b/d of oil taken offline in April through June due to low prices related to the pandemic, is back online, Platts Analytics said.
The curtailment estimate is larger than the 2 million b/d initially forecast from operators that temporarily took more crude volumes offline than they had earlier announced, and also from volumes shut-in by small and private operators that did not announce any curtailments, it said.
Evercore ISI analyst James West said the latest rig count numbers "underscor[e] the pessimism for H2 2020 activity levels" for land drilling, although he added gas-related activity will see a bit of surge.
"Gassy basins will continue to see a relative uptick in demand for drilling and stronger LNG exports help to support the supply-demand narrative further," West said.
Well completions continue to increase
Moreover, well completions continue to increase, investment bank Tudor Pickering Holt said in its daily investor note.
Although well completions "fell off a cliff" starting in March, the number of hydraulic fracturing crews troughed relatively quickly – in late May, TPH said. But by June, activity had begun to rebound "at a decent percentage clip off the admittedly anemic base," it said.
"Fracking" is a harbinger of near-term production, as that is the final stage of well completion prior to putting wells online.
"As we chat with industry contacts, we get the sense that September's again going to see a nice jump in [the] active US frac [unit] count and we may also see some net rig additions kick in this month," TPH added.
The bank noted there was a 14% month-on-month uptick in active "frac" crew/equipment units in June, followed by a 7% increase in July, and roughly a 20% month-on-month climb in August, or around 16-20 units.
"That materially surpassed our expectations," said TPH.