Houston — The US oil and natural gas rig count dropped by six rigs on the week to 279, rig data provider Enverus said, as domestic plays continued largely stabilizing without yet reaching a trough.
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Gas rigs accounted for the decline in the week ending July 8, with totals falling by seven to 87. Rigs chasing oil rose by one to 192, but the oil-rich Permian had the largest weekly change of any basin by far, losing seven rigs for a total of 133.
Rig counts in most other oily plays increased by one each, with the Bakken of North Dakota/Montana up to 11, the Eagle Ford in South Texas up to 10 and the Denver-Julesburg of Colorado up to four.
Analyst Matt Andre of S&P Global Platts Analytics said the drop in the Permian showed the play still had excess rigs to "shed." Andre noted the Bakken, Eagle Ford and DJ basins "didn't have a lot of room left to decline," since rigs totals there have already fallen to the lowest levels since unconventional drilling in those plays began a decade or more ago.
Some big E&Ps running few or no Permian rigs
Industry-watchers have kept a close eye for years on the Permian, the US' largest oil basin, since most of the majors and large independent E&Ps have a presence there. Permian production has fallen to just under 4.7 million b/d, according to S&P Global Platts Analytics, and output next month is forecast to fall further to 4.58 million b/d.
"Importantly, several large operators continue to operate at negligible or zero rig activity levels" in the play, Tudor Pickering Holt said July 6.
The bank said ExxonMobil is now at 30 rigs in the Permian, down from its Q1 average of about 57, and likely will drop to around 50% more to 15 rigs in the basin.
Tudor Pickering Holt said several large operators in the giant basin had no rigs running there as of July 3, including Occidental Petroleum, Apache Corp., Parsley Energy and Cimarex Energy, which all had only two rigs running in the basin during Q2 2020.
In Q2 2019, Oxy averaged 28 rigs in the play, with its rig count falling to 18 rigs in Q1 2020. Apache averaged 11 in Q2 2019 and seven in Q1 2020; Parsley averaged 12 rigs in Q2 2019 and 10 in Q1 2020; and Cimarex averaged seven rigs in Q2 2019 and nine in Q1 2020.
Basin-wide, the Permian averaged 459 rigs in Q2 2019, but totals had dropped to 412 in Q1 2020 and sunk further to 206 in Q2 2020 as the coronavirus pandemic continued to spread and oil demand plunged further.
Rig decline slowing
Since mid-March, when oil prices plummeted in response to low demand from the pandemic, the US rig fleet has lost nearly 560 rigs, or 67% of its bulk; but since mid-June, weekly rig declines have been in the single digits.
"The recent [minor] movement in rigs is part of the rig count's stabilization," Andre said.
In March and April, upstream operators swiftly hacked away at their 2020 capital budgets in response to plummeting crude prices, which fell from $47/b the first week of March into the teens in April. But oil prices has since recovered, climbing to $40/b in early July and staying near there.
For the week ended July 8, Platts Analytics estimates WTI prices averaged $40.70/b, up $1.51 on week; WTI Midland averaged $41.26/b, up $2.05; and the Bakken Composite price averaged $36.32/b, up 42 cents.
For gas, Henry Hub, prices averaged $1.69/MMBtu, up 12 cents, and Dominion South prices were unchanged, averaging $1.37/MMBtu.