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The US oil and natural gas rig count fell by seven to 1,138 during the first full week of 2019, which saw oil prices recover some lost ground, breaking above the $50/b mark, S&P Global Platts Analytics data showed Thursday.
The number of active oil rigs was unchanged at 897 this week, while the gas rig count dropped by six to 220. Also, a one-rig decline was seen in rigs not specified for oil or gas.
In total, domestic plays have lost 95 rigs since the recent high of 1,233 in the middle of November. Front-month WTI crude hit the mid-$70s/b in early October, which may have incentivized activity.
Analysts say a loss of more rigs would not surprise them, based on oil prices that fell more than 40% between those early October levels and late December, although prices have since regained some ground.
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On Thursday, front-month NYMEX crude futures settled at $52.59/b, up 23 cents day on day.
"Rigs have come off slightly, but are generally flat with the end of last year," Platts Analytics analyst Taylor Cavey said.
"A number of producers have already come out and said they were going to scale back from previous plans," given lower commodity prices, he said.
While more information will be released in fourth-quarter 2018 conference calls, "I'd imagine we'd see more producers follow suit and scale back operations if prices remain low," he added.
This week, the Permian Basin of West Texas/New Mexico saw the biggest activity increase, adding four rigs to reach a total of 478, with the other named basins unchanged, or up or down one or two rigs.
LOWER OIL PRICES AND 'SHAKY MACRO BACKDROP': ANALYST
Last weekend, Wells Fargo oilfield services analyst Jud Bailey estimated Lower 48 states drilling and completions spending for 2019 would see an 11% year-on-year decline, compared with a 1% increase predicted previously, owing to what he called lower oil prices and a "shaky macro backdrop."
"Our revised spending scenario, which now assumes that E&Ps set initial spending plans [based on around] $47-$50/b WTI, drives a roughly 120-to-140 decline in [the] rig count from late December levels and a year-over-year decline in the horizontal rig count of 8% in 2019," Bailey said.
"We also note that recent channel checks seem to support the likelihood of widespread rig releases and budget cuts to begin 2019," he added.
On the other hand, since around 43% of the US rig count is supplied by privately rather than publicly held operators, "this group could surprise to the upside" in terms of activity and also production this year, Stephen Richardson, an upstream analyst for Evercore ISI Group, said in a Wednesday webcast.
For the week that ended Wednesday, Platts' WTI assessments averaged $49.14/b, up $3.65, while its WTI Midland assessment averaged $43.16/b, up $3.49 and the Bakken Composite averaged $48.51/b, up $6.12.
For natural gas, Platts' Henry Hub assessment averaged $2.79/MMBtu, down 24 cents, while Dominion South averaged $2.52/MMBtu, down 19 cents.
In addition, 334 more new drilling permits were procured domestically in the week that ended Wednesday than in the previous week, for a total of 1,764. The Permian had the largest number, about a third, or 109, for a total of 189. An additional 35 permits went to operators in the Eagle Ford Shale, for a total of 49, and 26 went to Haynesville Shale players for a total of 39.
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