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US oil, gas rig count rises by five to 840, Permian sees pre-holiday levels

Highlights

Rigs in Permian, Marcellus rise by 4 each

US production growth seen falling in 2020

Permits pick up to 591, increasing 152

Houston — The US oil and gas rig count rose by five to a net 840 on the week, rig data supplier Enverus said Thursday, with the Permian Basin recovering to pre-holiday activity in the new year.

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A seven-rig gain in the number of gas-directed rigs nationwide, to a total of 160, outpaced a two-rig decline in the oil count to 678.

Rigs working in the Permian Basin of West Texas/New Mexico, the US' largest oil producing area, were up by four on the week to 407, the highest total since mid-November.

Also gaining four rigs, for a total 38, was the Marcellus Shale, largely sited in Pennsylvania. The chief gain came from the Dry Marcellus, up three to 18, with the Wet Marcellus up by one rig to 20.

Interestingly, the US horizontal rig count was up by 20 to a total 736 versus the vertical tally, which was down by 15 on the week to 58, said Bob Williams, Enverus' director of content.

"The strong start in horizontal wells indicates bigger independents and majors are starting off the year with relative confidence," Williams said.

Moreover, nationwide permits approved rose by 152 on the week to 591, with the largest change coming from the Permian, up 94 to 253.

Another sizeable jump came from the Haynesville Shale, up 24 to 36.

The total domestic rig count has bounced around below 900 since October and has been at 860 or below since early December as capital budgets wound down for 2019. Oil prices similarly wobbled in the low $50s/b and later the high $50s/b, respectively, around the same time frames.

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LOOKS INTO 2020 COMING

Some long-awaited visibility on 2020 activity is expected on Friday as Q4 2019 earnings kick off for oilfield service companies, with Schlumberger reporting, followed by Halliburton on Tuesday.

The services and equipment providers, usually the first to provide a glimpse each quarter into what the next six to 12 months hold for the oil patch, could project some welcome news for the US drilling landscape, according to investment bank Tudor Pickering Holt.

"Some of the anecdotal data points we've gleaned recently from our oilfield service friends in the field suggest that first-quarter 2020 US well completions activity is off to a surprisingly solid start," TPH said in a Thursday investor note.

Even so, top executives at oil and gas companies continue to message capital austerity. S&P Global Platts Analytics said in a Thursday report it sees decreased growth for US shale oil this year by a third, to an increase of 800,000 b/d in 2020 versus 1.2 million b/d in 2019.

However, there are factors that also support growth, such as well outputs.

Initial production rates for wells in the Permian and the Bakken, mostly in North Dakota, continue to rise at a "solid rate," although they are slowing in the mature Eagle Ford Shale play of South Texas, Platts Analytics said.

"Unless oil prices increase significantly in 2020 (not our most likely event), we expect growth to stay depressed by continued capital discipline," Platts Analytics said.

Also, costs are relatively flat, which yield "advantageous" well breakevens around $40/b WTI, comparing favorably to Platts Analytics' average 2020 WTI price forecast of $59/b WTI, it added.

WTI crude averaged $58.54/b this week, down $3.42, while WTI Midland averaged $59.36/b, down $3.38. The Bakken Composite price was $52.54/b, down $3.65.

For rigs chasing natural gas, Henry Hub prices averaged $2.05/MMBtu on the week, down a penny, while at Dominion South the average price was $1.71/MMBtu, up a penny.

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