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US oil, gas rig count falls 12 on week to 299, Enverus says, amid shut-in output return

Energia | Petróleo

Platts Global Alert - Oil

US oil, gas rig count falls 12 on week to 299, Enverus says, amid shut-in output return

Destaques

Oil rig totals drop below 200 level

Rig count bottom seen near

Higher oil price needed to entice new drilling

Houston — The US oil and gas rig count fell by 12 to 299 on the week, Enverus said June 11, as upstream operators continued taking rigs out of domestic fields as they bring back selected wells shut-in the last few months.

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The oil rig and combined rig counts have plunged to historic lows, with current levels not seen at least since 2005, Enverus data shows.

Oil rigs dropped by seven week on week to 199, while gas rigs fell five to 100.

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The horizontal rig count, which generally tracks unconventional wells, was at 256 this past week. Totals were last in the low 300s in May 2016, when oil prices were recovering from the high $20s/b. Prior to that, they haven't been below 300 since July 2006, when the shale era was just getting underway.

The rig count is down 64% from its mid-March level of 835, when E&P companies began releasing rigs and halting activity in response to the ongoing coronavirus pandemic as global oil demand sank along with crude prices.

Currently falling rig counts now appear close to a bottom, Matt Andre, analyst for S&P Global Platts Analytics, said, but added whether that brings about new activity is another story.

"Rising oil prices ($35/b-$40/b WTI) helps to bring the curtailed wells back online but doesn't promote new drilling," he said.

"We expect rigs to slowly return once we can sustain above $45/b WTI" in the Permian, he added. "But most of the other regions will have to wait for $45/b-plus, maybe even $50/b, to bring rigs back into action in a significant way."

In a June 8 report, S&P Global Platts Analytics said its latest forecast assumes the rig count will reach bottom in the coming days at around 70% below the mid-March level.

"Rigs will stay relatively flat until early 2021 as operators wait for several months of higher oil prices before starting to gradually increase the rig count," a recent Platts Analytics Spotlight report said.

On June 11, oil was trading in the high-$35s/b, down nearly $4 from the previous day's close on fears of a new wave of coronavirus infections and domestic GDP contraction. But oil prices are up substantially from the teens in April and $20s/b in early May. By contrast, early-March prices were around $46/b-$47/b.

Owing to the vast uncertainties this year with oil prices and demand, drilling activity likely won't improve in the US until 2021 "at the earliest," John Lindsay, CEO of big land driller Helmerich & Payne, said during a webcast chat last week with investment bank Evercore ISI.

Predictions within industry for rig counts this year vary, but most believe a rig count bottom is near. This could range from horizontal rig counts between 250-300, while some forecast lower counts in the 200-250 range.

"If you were to ask us, we'd bet on 200-250 based on the information we have," Lindsay said.

E&P customers will almost certainly stick to their revised 2020 capital budgets, Lindsay said, which are on average 40% to 50% lower than when unveiled early this year owing to the global coronavirus pandemic in which oil demand and crude prices plunged.

OPERATORS BRING BACK SHUT-IN PRODUCTION

Operators are bringing back US oil production shut-in from low demand and the crude oversupply, many ahead of when they'd originally projected.

At the RBC Global Energy and Power conference last week, Concho Energy, Parsley Energy, Diamondback Energy and several other operators said they were in the process of restarting shut-in wells or would do so shortly, according to recent RBC investor notes.

Parsley curtailed 26,000 boe/d of oil and most of it should be back by mid-June. Diamondback Energy said it will bring back 10%-15% of production. Oasis, which had 25% of its Williston Basin production shut-in, is ramping back up after recent higher oil prices and more favorable differentials.

Also, Penn Virginia said it had 40% of production shut-in, adding at current oil $35/b-plus prices, it "makes economic sense" to bring it back.

On June 9, ConocoPhillips CEO Ryan Lance said in a video conversation with IHS Markit's Dan Yergin that he foresees his company gradually bringing back 420,000 boe/d of net curtailed volumes starting in the next few months.

But the rest of 2020 will be tough, in any case. Even with higher oil prices, customers resolutely plan to stick to lower stated capex plans, which they slashed in March when oil prices began to plunge, Lindsay said.

"If anything, whatever cash [customers have, they may invest] in DUCs, but I doubt that will manifest in increasing rig counts in 2020," he said.

Oil cutbacks slash into US rig count
Oil-focused basins
Gas-focused basins
Date
Permian
SCOOP-STACK
Eagle Ford
Williston
Denver-Julesburg
Marcellus
Haynesville
Utica
3/4/2020
429
41
79
52
28
38
41
10
3/11/2020
428
39
75
52
27
38
42
10
3/18/2020
416
37
72
53
26
38
41
10
3/25/2020
396
36
68
51
21
38
40
10
4/1/2020
374
34
63
47
21
38
37
10
4/8/2020
334
26
58
41
19
36
38
10
4/15/2020
302
22
46
37
14
37
37
10
4/22/2020
262
19
35
32
11
35
34
10
4/29/2020
229
15
28
28
9
31
34
10
5/6/2020
213
14
23
24
8
30
33
10
5/13/2020
195
11
23
17
7
28
32
10
5/20/2020
185
11
20
15
7
29
31
10
5/27/2020
171
9
17
13
8
28
32
11
6/3/2020
157
10
14
12
7
27
33
11
6/10/2020
150
9
11
10
8
28
32
9
14-week change
-279
-32
-68
-42
-20
-10
-9
-1
-65.0%
-78.0%
-86.1%
-80.8%
-71.4%
-26.3%
-22.0%
-10.0%
Source: Enverus