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The US oil and natural gas rig count ticked up one on the week to a net 1,086 Thursday, adding another bit of odd behavior to what has generally been a downward trend since November, according to the latest S&P Global Platts Analytics data.
Oil rigs accounted for the gain, as the number of oil rigs rose by a net nine to 865, while the number of gas rigs dropped by eight to 217.
"The decline in rigs is in line with the general guidance trend of rig reductions, although a number of producers have indicated that more rigs could be added if crude prices continue to improve," Platts Analytics analyst Sami Yahya said.
The US rig count has been dropping more or less steadily since its recent peak of 1,233 last November. But in the last five weeks it has been erratic, dropping 20 rigs one week in mid-February and then rising 20 rigs another week later in the month.
While the main focus of many producers remained production growth, operators could more than likely achieve that goal even with fewer rigs because of abundant drilled but uncompleted wells, especially in the Permian Basin of West Texas and New Mexico, Yahya said.
ZIG-ZAGGING RIG COUNT MAY BE 'JUST NOISE'
"The current up and down movement in rigs is likely just noise, but difficult to say for sure," he said. "[But since] the number of rigs appears steady in the past couple of weeks, we could be headed to an equilibrium in some areas as producers reach their goal number of rigs in the short term."
Rig movements this week occurred in most of the nine large unconventional plays. The SCOOP-STACK in Oklahoma had the largest changes this week, up five to 93 rigs.
Other rig movements were smaller. The dry Marcellus Shale in Pennsylvania and the Williston Basin in North Dakota/Montana each rose two rigs to 42 and 62, respectively, while the Permian Basin was up one rig to 463.
Areas that lost rigs this week were the Haynesville Shale in Northwest Louisiana/East Texas, down three to 63; the Eagle Ford Shale in South Texas, the wet Marcellus Shale and the Utica Shale largely in Ohio, each down by one rig. That left the Eagle Ford with 88 rigs, the wet Marcellus with 26 and the Utica with 15 rigs.
The Denver-Julesburg Basin of Colorado was unchanged this week at 27 rigs.
US permits overall were down by 106 this week to a total of 1,416. Largest moves were seen in the Denver-Julesburg, up by 61 permits to 155; SCOOP-STACK, up by 17 permits to 41; and the Permian, down 31 permits from the previous week to 172.
One big reason for the recently declining rig count is that operators are increasingly more efficient and able to produce more oil using fewer rigs. Perhaps the most noteworthy industry feature of the 2014-2018 period is the continued growth in US oil and gas production, despite a dwindling rig count, according to an article in the most recent S&P Global Platts edition of The Land Rig Newsletter.
OUTPUT ESTIMATES MIGHT JUMP IF DUCS CAME ONLINE
Crude output during the period rocketed up 3.5 million b/d to almost 11 million b/d last year, while natural gas output jumped 20 Bcf/d to 90 Bcf/d, US Energy Information Administration figures show. EIA also projects crude and gas output this year at 12.4 million b/d and 97 Bcf/d.
During this time, the number of DUCs has sharply increased, suggesting those output estimates would be sizably greater if DUCs were brought online.
EIA estimates DUCs more than doubled from 2014-2018 to more than 8,700 from about 4,000. Platts Analytics' more conservative estimate puts the DUC number at roughly 3,400 in 2013 and about 4,800 in 2018.
In that sense, the ultimate impact of drilling efficiency has yet to be felt in the consequent growth of oil and gas production. In Platts Analytics' estimate of recent shale oil DUCs, if the current inventory of 4,200 oil wells were completed in just one year, it would result in added production of about 900,000 b/d for the year.
-- Starr Spencer, email@example.com
-- Edited by Valarie Jackson, firstname.lastname@example.org
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