Denver — The number of active US oil and gas rigs tumbled by four to 691 this week, the lowest count since March 2017, with a slowdown in the prolific Permian Basin leading the decline, data from consultants Enverus showed.
The Permian lost six rigs, with totals now down 103 since last November, as operators look to tighten budgets and improve drilling efficiencies in a lower-price environment. The bulk of the decline has occurred in the Texas portion of the basin. Still, despite the steep rig falloff, production continues to set new records in the basin, with additional oil and gas growth expected in 2020.
With only one month left in the year, 2019 production is forecast to grow a little over 800,000 b/d year over year. In 2020, growth is expected to continue, however, at a slightly slower rate, increasing just shy of 700,000 b/d on year. Natural gas production in the Permian is also forecast to increase from 4.3 Bcf/d in 2019 to 5 Bcf/d in 2020, according to Platts Analytics.
During the last wave of quarterly earnings reports, most operators in the Permian either reiterated their existing capital spend guidance or tightened it slightly -- a signal that efficiency gains are still managing to offset some of the pressures brought on by a weak price environment and lack of capital infusion.
Capital and production efficiencies have proven their worth. A number of producers -- including Nobel, Devon, Cimarex, Parsley Energy, Pioneer Natural Resources and Marathon Resources--have managed to not only tighten or meet their budgets, but also increase their production guidance. As with prior quarters, operators continued to budget around the $50/b mark, prioritizing free cash flow generation and increased returns to investors.
Some operators, like EOG Resources, already wary about the historical volatility of commodity prices, noted if crude prices improve, they will refrain from growing their guidance further and continue to focus on existing plans.
Fortunately, operators in the basin have amassed a considerable inventory of drilled-but-uncompleted wells (DUCs), which have been instrumental in helping operators achieve production targets.
The Permian currently hosts about 2,000 DUC wells. During some months, well completion rates in the basin have exceeded 100%, signifying the need for DUC wells to maintain or grow production, especially as new pipeline takeaway expansions are brought online.
Week over week, US oil and gas fields lost a net total of four rigs from 695 to 691. The Bakken, Marcellus and SCOOP-STACK all added one rig each, while Ohio's Utica Shale slipped by one to 13.
-- Brandon Evans, email@example.com
-- Edited by Jim Levesque, firstname.lastname@example.org