Denver — A late-summer rally in Henry Hub gas prices, which edged up to a 15-week high Monday at $2.64/MMBtu, wasn't enough to stem the slowdown in gas-directed drilling activity this week.
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Rig counts in North America's most active dry gas basins, including the Marcellus and the Haynesville, continued to hover at or just above recent multiyear lows this week at 46 rigs and 52 rigs, respectively, data released Thursday by Enverus DrillingInfo showed.
Among the major oil plays, Texas has been the hardest hit by the recent slowdown in drilling.
Producers in the Permian Basin of West Texas shed another four rigs this week to 414 -- the fewest since November 2017. In the Eagle Ford, a gain of four rigs this week to 77 still left the basin's total count just above a recent 31-month low.
A steady slide in SCOOP/STACK drilling continued this week, with rig counts in the Oklahoma play dropping by three to 62, down from early first-quarter highs at over 100 rigs.
Drilling in North Dakota's Bakken Shale and Colorado's Denver-Julesburg has been seemingly less affected by the recent slowdown. Rig counts in the two basins, estimated at 58 and 27, respectively, were little changed week on week and were down only two to three rigs from first-quarter averages.
Overall, the US oil and gas rig count declined by 17 this week to 949, marking a fresh 29-month low for the upstream industry.
"US land continues to be the most challenged sub-sector, with little visibility to a bottom in activity," Marc Bianchi, an analyst at Cowen, said in a research note Thursday.
Capital expenditure tracking shows that among 45 exploration and production companies reporting second-quarter results, an aggregate 56% of 2019 budgets was already deployed through the end of June, Bianchi said.
As the upstream industry, and especially dry-gas producers, continue to beat the drum of capital efficiency with the investor community, many are hoping to do more with fewer rigs in an effort to keep production volumes growing this year.
In the Haynesville Shale, though, a nearly 24% decline in rig count since January now appears to be catching up with producers there.
Month to date, dry gas output from the basin has averaged just under 11.6 Bcf/d, which is down sharply from a record high at over 12.1 Bcf/d in early August, data from S&P Global Platts Analytics shows.
An abrupt pause in the Haynesville's recent and spectacular growth rate comes as gas prices at one of the basin's primary market locations, the Henry Hub, have trended near three-year lows this summer.
From June to August, prices at the benchmark hub averaged just $2.27/MMBtu, significantly below the breakeven cost for an average dry gas producer there.
In fact, according to Platts Well Economics Analyzer, even half-cycle breakeven cost in the Haynesville -- which excludes acreage, development and exploration expense -- averages about $2.52/MMBtu.
Sample production receipts from the Haynesville show that declines, concentrated in Louisiana, have been widespread at processing and gathering locations on multiple pipelines, suggesting that the recent drop in production is real and not the result of maintenance or temporary flow constraints.
-- J. Robinson, firstname.lastname@example.org
-- Edited by Bill Montgomery, email@example.com