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US oil and gas rig count climbs 11 to 347 as crude prices stabilize: Enverus

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US oil and gas rig count climbs 11 to 347 as crude prices stabilize: Enverus

Highlights

Oil rigs at five-month high of 246

Natural gas forward curve strengthens

Permian consolidation trend likely to extend

New York — The US oil and gas rig count rose by 11 to 347 in the week ended Oct. 21, rig data provider Enverus said, marking a second straight week of double-digit increases.

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The number of oil-focused rigs climbed eight to 246, the highest since the week ended May 20 and 25% above its August low of 194.

The number of active gas-focused drilling rigs rose three to 101, a four-month high and up 17% from its most recent low of 86 in late July.

Drilling rig counts have now climbed in seven of the past eight weeks, putting the nationwide total up 65, or 30%, from late August. Still, the number of rigs active in all plays was down 578, or 62%, than the same period last year.

The drilling recovery comes amid a broad stabilization of crude prices. Front-month NYMEX WTI has traded at around $40/b since mid-September.

"While rig additions have been slow, it is to be expected as oil and gas prices do not support a rapid recovery," said Taylor Cavey, an analyst with S&P Global Platts Analytics. "We expect to see a slow recovery in the coming weeks and months among the oil plays as operators will need to generate cash beyond well completions activity. In the gas plays, we expect to see a more pronounced response, particularly in the Haynesville, as prices improve."

Permian, Eagle Ford see slight rig gains

Rig counts across the major named basins were mixed.

In the Permian Basin, the number of active rigs climbed two to 145, the highest since the week ended June 10, and Eagle Ford operators added one rig for a total of 22.

Operators added two rigs in the SCOOP-STACK, putting the total there up to 14. The Utica play rig count climbed one for a total of 8, but the number of rigs active in the nearby Marcellus basin dipped one to 28.

Bakken rig counts were steady at 13, and the number of rigs active in the Denver-Julesburg play remained flat at six.

The Haynesville rig count pulled back one to 38, but the number of rigs active there were still near six-month highs. The recovery in drilling activity in the play has pushed gas production to a four-month high of 12.4 Bcf/d during the week ended Oct. 20.

Recent bullishness in the forward gas curve, particularly for the winter 2020-21 season, could be a motivating factor for gas producers to begin to ramp up drilling activity and production.

The NYMEX Henry Hub November contract remained flat at $3.02/MMBtu on Oct. 22 but is up by 50 cents since the beginning of October. The remaining winter strip, December through March, slipped 3.5 cents to $3.35/MMBtu. This is up 30 cents, or around 10%, from where the strip traded at the beginning of October.

Permian consolidation trend likely to extend

A sudden wave of consolidation in the Permian Basin after many months of deal-making silence is expected to continue in spurts in a trend that should expand to other regions such as the Bakken Shale and DJ Basin, energy analysts said.

In a series of all-stock deals, ConocoPhillips scooped up Permian pure-play Concho Resources for $9.7 billion on Oct. 19 and, one day later, Midland Basin leader Pioneer Natural Resources snagged Parsley Energy for $4.5 billion in a more familial deal.

Already, Chevron closed on its $5 billion acquisition of Noble Energy early in October and, last month, Devon Energy agreed to buy WPX Energy for $2.56 billion in a so-called merger of equals.

The recent deals would leave the top Permian producers as Oxy, Pioneer, ConocoPhillips, EOG, ExxonMobil, Chevron, Devon and Permian pure-play Diamondback Energy, as well as a couple of strong privately held producers Mewbourne Oil and Endeavour Energy, the latter of which resisted pre-pandemic bids from Shell and others.

More than 40 US oil and gas producers have filed for bankruptcy this year, according to the law firm Haynes and Boone. That's on track to be the most filings since 2016, but the aggregate debt from those companies in 2020, led by shale trailblazer Chesapeake Energy, should surpass the 2016 amounts by the end of the fourth quarter.