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Highlights

Oil rigs down 11 to 897, gas rigs up eight to 226

Permits up by 563 or 65% as new year dawns

US rig count has fallen 7% since holiday season began

Houston — The overall number of US oil and gas rigs dropped by two this past week to 1,145, although that figure reflects more natural gas-oriented rigs added to the fleet and even more oil rigs taken out, S&P Global Platts Analytics data showed Thursday.

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In all, oil rigs were down by 11 over the New Year's holiday week, leaving 897, while eight rigs chasing gas were added for a total of 226, Platts data showed.

In addition, the number of rigs classified as oil/gas, which usually indicates offshore Gulf of Mexico rigs, was up by two to 19.

Movements within specific domestic onshore plays were minor at the end of the holiday season.

Click here for full-size map

The Eagle Ford Shale in South Texas showed the most positive movement, with an increase of four rigs to 91. Both the Permian Basin, of West Texas/New Mexico, and the Marcellus Shale, which is largely in Pennsylvania, added three rigs apiece for respective totals of 474 and 63.

Also, the DJ Basin of Colorado fell by two to 34.

In the SCOOP/STACK in Oklahoma, the Williston Basin of North Dakota/Montana and the Utica Shale of Ohio, there was no change. There, rig counts remained at 105, 63 and 16, respectively.

HISTORICALLY RIG COUNT FALLS 2%-3% IN Q4

The rig count has fallen 7% since its most recent high of 1,233 for the week ended November 14, 2018. That is in keeping with historic trends that typically see the rig count falling 2% to 3% in any given year between the third and fourth quarters, owing to the North American holiday season at year-end.

But in January, the tendency is for a flattish rig count for the first couple of weeks. After that, the rig count typically follows oil prices, with a lag of two to three months between price movement and rig adds or reductions.

Also, 1,426 permits were added as the new year began this week, up by 563 or 65% as the new year began. The DJ Basin showed the most permitting activity of the eight named basins at 209, up by 161. The Permian was a distant second at 80 permits added, although it was down by five week on week, while the Marcellus added 41 permits, up by 16.

The other five prominent basins added fewer than 30 permits apiece, Platts data showed.

Commodity prices were slightly lower in the week. WTI for the week ended January 2 averaged $45.49/b, down 26 cents, while WTI Midland in the Permian Basin was $39.68/b, down 73 cents.

The Bakken composite price was $42.39/b on average for the week, down 22 cents.

For gas, the Henry Hub price averaged $3.03/MMBtu for the week, down 45 cents, while Dominion South prices in Appalachia averaged $2.71/MMBtu, down 36 cents.

LACK OF PRICE VISIBILITY FOGS CAPEX PLANNING

Oil prices in particular have languished in recent months, having fallen from recent levels in the lofty mid-$70s/b during early October - at just the time that E&P companies were starting to map out their 2019 capital budgets.

Low crude prices and the need to plan the coming year's activities and set production goals despite a lack of price certainty has likely reduced the comfort levels of both oil executives and forecasters for the next few weeks as upstream capital-expenditure plans are finalized. They will be released along with Q4 earnings later this month and in February.

Analysts expect E&P companies to continue budgeting conservatively, as they did during the recent industry downturn and in 2018. If oil prices climb and stay higher, many operators raise capex by 10% or more.

Investment bank Jefferies summed up the general oil patch cloudiness, saying in a Wednesday investor note that 2019 "feels a little different to us ... the foundation doesn't feel as firm, the future doesn't feel as certain and optimistic, and the path forward does not seem as clear."

"The markets are extremely volatile and virtually impossible to anticipate," Jefferies said. "But unlike other turbulent periods, the reasons why are not obvious."

-- Starr Spencer, starr.spencer@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com