Houston — The US oil and gas rigs count dropped by four on the week to 836, the lowest total since early February 2017, consultants Enverus said Thursday, in the first rig tally of the 2020s.
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The number of rigs chasing crude oil for the week ended January 1 was down by three to 670, while gas-oriented rigs moved up by one to 163. Totals for rigs not classified as either oil or gas dropped by two.
The total domestic rig count has lost just over 400 rigs, or 32%, since the recent peak of 1,237 in mid-November 2018.
The US rig count fell 27% this year, starting at 1,145 rigs before shedding 309.
In the coming months, S&P Global Platts Analytics forecasts "subtle" rig declines across the board, analyst Taylor Cavey said, before totals "hold relatively flat."
"Some producers are taking a maintenance-mode approach and are dropping rigs here and there, whereas other operators plan to keep drilling steady and grow production slightly via further efficiency gains," Cavey said.
Activity-wise, operators ushered in the new year and decade on a low note for some of the US' largest oil and gas basins.
The number of rigs in the Permian Basin of West Texas and New Mexico was up by one on the week to 396, but last week's 395 was the lowest number in the giant play since July 2017.
In recent weeks, the Marcellus Shale, mostly sited in Pennsylvania, and the Haynesville Shale, in East Texas and Northwest Louisiana, have also hovered at levels last seen in 2017.
On Thursday, the Haynesville was up one rig on the week to 48, while the Marcellus had dropped by two to 37. Specifically, the Dry Marcellus (18 rigs) and Wet Marcellus (19 rigs) were each down one.
Most basins either gained or lost a rig or two over the Christmas-to-New Year holiday week.
The Denver-Julesburg Basin in Colorado gained two rigs on the week for a total 20, while the Williston Basin (54 rigs), in North Dakota and Montana, and the SCOOP-STACK (42 rigs), in Oklahoma, each gained one.
The Eagle Ford Shale in South Texas lost two rigs leaving 79, and the Utica Shale, mostly in Ohio, slipped by one to 11.
While the Eagle Ford was mostly range-bound with a rig count in the 70s and 80s for most of 2019, that was not true of the SCOOP-STACK, which fell 60% over the full year.
The Oklahoma basin began 2019 at 105 rigs. Apart from recent weeks, the last time it posted rig counts in the low 40s was in August 2016.
Many operators with acreage in that play have opted to shift capital dollars to the Permian, which is more productive.
Productivity has slipped in the play, Enverus' director of energy analyst Sarp Ozkan said.
"[Particularly] in the STACK area, in 2017-2018 and even into 2019, you weren't seeing the kind of results that you saw in 2015-2016," he said.
CAPEX TO DROP AS WTI RANGEBOUND
As WTI prices continue to twirl barely above $60/b, as it has for the last few weeks, early indications are US upstream capital budgets this year will drop around 10% and will be predicated on $50-$55/b oil prices.
Wall Street has been demanding of the oil patch in the last couple of years, which forced E&P companies to get increasingly strict about their spending. As a result, producers have rigorously adopted austere capital budgets, and most have refused to budge unless there is a clear reason for doing otherwise will boost cash flows.
Also, efficiencies in rigs and well completion designs and drilling that have allowed more production yield per well, and have allowed companies to eke out more oil per dollar spent.
"If $60/b oil persists, there will be a slight uptick this year in the rig count," said Bob Williams, Enverus' director of content. "Unless there's a real black swan event ... I doubt the rig count will reach much above 900 this year and probably not touch 1,000 until 2021."
The beneficiary would be the Permian Basin because it features the best economics, generally speaking, Williams said, noting half of the existing active fleet is already there.
|US oil, gas rig count plummets in 2019|
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-- Starr Spencer, firstname.lastname@example.org
-- Edited by Jim Levesque, email@example.com