Houston — US oil and gas rigs dropped modestly on the week to 835, down three, rig data provider Enverus said Thursday, and totals stand to plummet from here after crude prices plunged more than 30% in recent days.
Oil markets in turmoil will almost certainly result in decreases in the weekly rig count going forward as producers began announcing capital budget cuts in response to WTI prices now hovering in the low $30s/b.
"We've already heard of some operating companies already drastically slashing capex," said Bob Williams, Enverus' director of content. "The longer this lasts, the greater the likelihood that the rig count will be cut in half, in our estimation."
On March 4, WTI oil averaged $46.51/b, according to S&P Global Platts Analytics, before oil demand levels already predicted lower from the spreading coronavirus received another blow with the inability of OPEC and Russia to agree on further crude production cuts aimed at shoring up global prices.
By Wednesday, WTI weighed in at $37.13/b, down $9.38.
'PERFECT STORM OF NEGATIVES'
Williams noted a "perfect storm of negatives" for the oil and gas drilling industry lately: too much supply, sagging demand, and too-high debt levels combined to prompt operators to stay within cash flow.
"Essentially, [that is already] an industry-wide austerity program," he said.
The scenario was exacerbated in recent weeks and days by a double-whammy of the COVID-19 virus panic coinciding with Saudi Arabia and Russia playing chicken with market share. Many experts believe those players will return to the table at some point, since oil prices likely plunged lower than they believed would happen.
E&Ps QUICKLY PARE DOWN ACTIVITY
Oil and gas producers moved swiftly to assure the market they would cut back on capital spending and activity to bare-bones levels.
On Thursday, Apache said it would bring the number of rigs it is running in the Permian Basin down to zero. It had eight rigs operating in the basin in Q4. Diamondback, PDC Energy and others also signaled their intention to drop rigs in the weeks and months ahead.
Most of the rig count decreases this past week came from oil rigs, which totaled 687 on Thursday, a decrease of three, while gas-oriented rigs stood at 148, unchanged on the week.
In specific plays, most of the drops this week came in the Eagle Ford Shale in South Texas, where four rigs exited that play, leaving 75 rigs.
Rigs in Oklahoma's SCOOP-STACK play slipped two to 39, while the Permian Basin of West Texas/New Mexico and the DJ Basin in Colorado dropped one rig apiece, leaving 428 and 27, respectively.
The Haynesville Shale in East Texas/Northwest Louisiana gained a rig, making 42.
Holding steady from last week to this week were Williston Basin in North Dakota/Montana at 52 rigs; the Marcellus Shale in mostly Pennsylvania with 38; and the Utica Shale mostly in Ohio with 10 rigs.