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US oil, gas rig count jumps 9 to 640 on week; Eagle Ford shows biggest change

Highlights

Eagle Ford rig count rises 5 to 55

Permian adds 3 rigs to 266

Nationwide rig totals up 9% from end of Q2

The US oil and gas rig count rose by nine to 640 in the week ending Sept. 29, Enverus said, with the biggest change in the Eagle Ford Shale of South Texas.

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Oil rigs were up four to 501, the highest since early April 2020, and natural gas-oriented rigs were up five to 139.

The Eagle Ford gained five rigs for a total 55 for the week ended Sept. 29, also pushing the count there to the highest since early April 2020.

The Eagle Ford, originally an unconventional natural gas play for horizontal drilling before oil became the top target, is a large basin with current oil production of 1.17 million b/d and natural gas production of 4.5 Bcf/d.

The play has not grown much in recent years. Output did reach 1.7 million in March 2015 but fell in the wake of volatile oil prices and increasing operational shifts by upstream players to the Permian Basin of West Texas/New Mexico.

But if rig counts were to remain at current levels in the next few years, S&P Global Platts Analytics estimates Eagle Ford oil production could rise slightly to 1.29 million b/d of oil, and gas output would be sizably larger at 5.5 Bcf/d by 2025.

Rigs reach early pandemic levels

Rig counts have grown to levels not seen since very early in the pandemic, when upstream operators began dropping rigs swiftly as they slashed spending to sought to conserve capital as low oil demand caused a crude price crash.

Outside the Eagle Ford, rig counts recently reached March or April 2020 levels in several plays including the Permian Basin and the SCOOP-STACK in Oklahoma.

Land rigs in September surpassed the 500 mark for the Baker Hughes rig count, which uses a different counting methodology than Enverus, a level also not seen since April 2020.

In other US basins for the week ended Sept. 29, the Permian rose by three rigs to 266, and the DJ Basin mostly of Colorado gained a rig, making 14.

Shedding one rig each were the Haynesville Shale, leaving 52, and the Marcellus Shale, leaving 34. The SCOOP-STACK lost two rigs for a total 33.

The Bakken Shale, largely in North Dakota, and the Utica Shale, mostly in Ohio, were both unchanged, leaving 27 and 10 rigs, respectively.

The week ended Sept. 29 marked the close of the month and of the third quarter. The Q3 rig count was up 9% from 588 at the end of Q2 and nearly double the exit rate of 326 rigs in a pandemic-hit Q3 2020.

Horizontal activity, essentially a proxy for shale activity, closed out Q3 averaging 472 rigs, up about 9% from Q2 2021 and about double that of the 235-horizontal rig average in domestic fields during Q3 2020.

"Nearly all of these gains were driven by private E&Ps -- 38 rigs versus Q2 2021 exit, as public E&Ps held essentially flat," TPH said. "Looking ahead, we'd expect public E&Ps to start becoming a bigger piece of the incremental rig additions pie."

The 9% quarter-on-quarter increase in Q3 compares to 13% horizontal count growth in Q2, which averaged 432 rigs, and 27% in Q1, which averaged 381 rigs.

Platts Analytics said it expects rig counts to continue ticking up through 2022.

Prices supported

Higher oil and gas prices have boosted operators' conference. In June, WTI crude prices broke into the $70s/b for the first time not only since the pandemic but since October 2018. Prices have perched there for most of that time despite a few dips into the $60s/b in August and early September on delta variant concerns.

For the week ended Sept. 29, WTI averaged $74.63/b, up $3.07 week on week; WTI Midland averaged $75.33/b, up $3.35; and Bakken Composite averaged was $74.42/b, up $3.10.

Natural gas prices have been lofty, too. Henry hub averaged $5.40/MMBtu in the week, up 29 cents, and Dominion South prices averaged $4.37/MMBtu, up 5 cents.