The US oil and gas rig count leaped 15 to 722 on the week, energy analytics and software company Enverus said Jan. 13, as E&P operators took advantage of replenished new year capital budgets to resume a brisk pace of rig adds.
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Oil-directed rigs jumped 13 to 707, while rigs chasing natural gas moved up two to 172 during a week where crude prices moved over $80/b.
"The increase this week was impressive, but I wouldn't consider it to be out of the ordinary," Taylor Cavey, senior analyst-supply and production at S&P Global Analytics, said. "Looking back, there were several occasions with similar increases in the last few weeks and months. I wouldn't read too much into it."
"We're expecting similar growth to 2021 through this year," Cavey said.
Some 300 rigs were added to the rig count in 2021 after starting the year at 406.
"Also, we generally don't make substantial changes to the rig forecast ... and don't foresee anything changing this month," said Cavey.
Oil and gas prices moved up this week, according to S&P Global Platts estimates. WTI prices averaged $80.09/b, up $3.11, while WTI Midland averaged $81.32/b, up $3.38 and Bakken Composite averaged $80.40/b, up $3.79.
Also, gas at Henry Hub averaged $4.11/MMBtu, up 40 cents while at Dominion South it averaged $3.87/MMBtu, up 61 cents.
Most of the eight biggest domestic basins added a single rig for the week ended Jan. 12. That included the Permian Basin of West Texas/New Mexico, the Haynesville Shale of East Texas/Northwest Louisiana, the Eagle Ford Shale of South Texas, the SCOOP-STACK play in Oklahoma, the Marcellus Shale, largely sited in Pennsylvania and West Virginia, and the Utica Shale, mostly in Ohio.
Permian again at 300 rigs
That caused the Permian to tick up again to 300, a figure it has wobbled around in recent weeks, the Haynesville to 66, the Eagle Ford to 58, the SCOOP-STACK to 41, the Marcellus to 39, and the Utica to 11.
The only two basins that didn't add a rig were the DJ Basin chiefly in Colorado and the Bakken Shale in North Dakota/Montana.
The DJ rigs remained stable at 16 rigs for the week ended Jan. 12, while the Bakken lost a rig leaving 31.
The Haynesville's 66 rigs represent a recent activity record – the highest level since the first week of March 2019.
Directionally oriented rigs drove the rig count for the week ended Jan. 12, gaining eight to 77. Horizontal rigs were sluggish on the week, climbing by just three to 571, while vertical rigs gained four to 74. But horizontal rigs drove the year's rig adds, closing out 2021 at 563 after beginning the year at 333.
But private E&P companies accounted for most of the total rig adds for the week ended Jan. 12. Privates added 12 rigs for a total 406. In contrast, majors and large-cap independents each added just two rigs as a group – pushing up large cap independents to 120 and majors to 49.
'Key advantage' of small E&Ps
"There is a key advantage of the smaller producers that are able to grow without impacting the overall supply picture and also provide high free cash flow yields," Eight Capital Research analyst Phil Skolnick said in a Jan. 10 investor note.
But larger publics recently stepped forward as well, energy investment bank Tudor Pickering Holt said in a Jan. 10 analyst note.
"Importantly, public E&Ps continue to play a more meaningful role in the horizontal rig additions story," TPH said.
Public E&Ps accounted for around 65% of the 64 horizontal rigs added during fourth-quarter 2021, the bank added.
In addition, while US completion activity was slow during the holiday season, "now with fresh capex and supportive pricing we will see spreads [crew-equipment units] bounce quickly back to 270 or so," Mark Rossano, senior analyst for Primary Vision, which tracks hydraulic fracturing units, said Jan. 7.
The Primary Vision hydraulic fracturing, or "frac," count gained 10 to 244 for the week ended Jan. 7.
Rossano noted that frac activity in the Permian Basin of West Texas/New Mexico "barely dropped [during the holidays] and outpaced many of the previous years," underscoring the region's underlying strength.
"We are also starting to see more refrac interest in 2022 as companies look to evaluate wells from 2018 and 2019 for a possible uplift by doing either a workover, acid wash or refrac," he said.
"This will help provide a bump in production near-term," he added. "The issue remains supply chains and labor shortages that will keep the available horsepower capped."