Weekly Rig Count Down Big Again – This Time Oil, Not Gas Rigs
May 22, 2023 Industrywide Issues, Research
Weekly Rig Count Down Big Again – This Time Oil, Not Gas Rigs
May 22, 2023 Industrywide Issues, Research
Oilfield services company (OFS) Baker Hughes is the keeper of the venerable oil and gas industry rig count, which it has been tabulating since 1944. Last Monday, we reported on the previous Friday’s rig count as a gut punch to the natural gas sector, with some 16 gas-focused rigs being taken out of service (see U.S. Natural Gas Drilling Rig Count Craters, Down 10% in One Week). The prevailing theory is that there is a massive pullback on new natgas drilling due to ongoing low prices for gas. We cautioned that one week does not make a trend. Let’s see what happens in future weeks. So, how about the BH rig count from last Friday? What did it show?
This past Friday’s rig count was another gut punch–but this time, all of the rigs sidelined, 11 of them, were oil-focused rigs. There were no new gas-focused rigs taken out of service last week. However, neither were there any new gas-focused rigs added back into service last week. The rig count for all of the gas-focused plays remained static last week–no changes up or down. But remember that’s after a serious decline (10%) from the previous week. So the count went down, and it has stayed down, for a second week.
From NGI:
The U.S. rig count posted a second straight double-digit decline during the week ended Friday (May 19), this time with losses hitting the oil patch, the latest figures from Baker Hughes Co. (BKR) show.
U.S. operators shelved 11 rigs — all oil-directed — for the period, dropping the domestic tally to 720, lagging the year-earlier count of 728.
In the week-earlier period, BKR reported a 16-rig decline in natural gas drilling that caught the attention of futures traders as it signaled an upstream response to weak prices in 2023.
As for the latest rig declines, 10 rigs exited on land, with the Gulf of Mexico count down one to 21, versus 17 a year ago. Ten horizontal rigs packed up shop, joined by one directional unit, according to the BKR numbers, which are partly based on data from Enverus.
…
Counting by major drilling region, the Permian Basin saw the largest weekly drop at four rigs, leaving the play with 349, versus 343 at this time last year. The Eagle Ford Shale dropped three rigs from its total, while the Ardmore Woodford and Denver Julesburg-Niobrara each posted one-rig declines.
In the state-by-state count, Texas saw nine rigs exit for the period, dropping the state to 357 rigs overall, flat year/year. Colorado dropped two rigs week/week, while California and Louisiana each dropped one.
On the other side of the ledger, Wyoming and New Mexico added a rig a piece during the period, the BKR data show.*
From Reuters:
U.S. energy firms this week cut 11 oil rigs, the most in a week since September 2021, energy services firm Baker Hughes Co (BKR.O) said in its closely followed report on Friday.
That follows last week’s cut of 17 natural gas rigs, which was the biggest drop since June 2020.
The oil and gas rig count, an early indicator of future output, fell by 11 to 720 in the week to May 19, the lowest since May 2022. , ,
Baker Hughes said that puts the total rig count down eight, or 1%, below this time last year, the first time since April 2021 that rigs were lower than the year-ago level.
U.S. oil rigs fell by 11 to 575 this week, their lowest since June 2022, while gas rigs were unchanged at 141.
Most of the rig reductions were in Texas where the total count dropped by nine to 355 this week, the lowest since May 2022.
Texas lost three rigs in the Eagle Ford shale, bringing the total in that basin down to 59, the lowest since April 2022. The state also lost four rigs in the Permian, bringing the total in that basin down 349, the lowest since March.
In New Mexico, meanwhile, the count rose by one to 109, its highest since February.
New Mexico’s oil production grew more last year than any other state, including top producer Texas, and accounted for half the nation’s overall gain, signaling its importance in expanding U.S. oil output.
Data provider Enverus, which publishes its own rig count data, said drillers cut six rigs in the week to May 17, dropping the overall count to 780. That put the count down about 35 rigs over the past month and down 5% over the past year.
U.S. oil futures were 11% so far this year after gaining about 7% in 2022. U.S. gas futures , meanwhile, have plunged about 42% so far this year after rising about 20% last year.
The drop in prices has already caused some exploration and production companies to cut rigs, especially gas rigs, with many still focusing more on returning money to investors and paying down debt rather than boosting output.
Despite some plans to lower rig counts, U.S. oil output from the seven biggest shale basins is due to rise in June to the highest on record, according to the Energy Information Administration’s projections this week. (2)
Bloomberg, which is more propaganda than real news, hyped the news with an opening line that says, “Oil drilling is collapsing…”
Oil drilling is collapsing in the US as producers rein in output, mirroring a recent plunge in rigs searching for natural gas.
Rigs targeting crude declined by 11 to 575 this week, according to data released Friday by Baker Hughes Co. It’s the biggest weekly drop since September 2021. The pullback was led by the Permian Basin of West Texas and New Mexico, the most prolific US shale play, where four rigs were dropped.
Shale explorers, particularly closely held companies, are responding to lower oil and natural gas prices by keeping a lid on spending growth and in some cases cutting their budgets until crude prices climb again. The drop in oil rigs follows last week’s retreat in natural gas drilling by the fastest pace in seven years. (3)
(1) NGI’s Daily Gas Price Index (May 19, 2023) – U.S. Rig Total Walloped Once Again, This Time With Oil Count Down Double Digits
(2) Reuters (May 19, 2023) – US drillers cut most oil rigs in a week since Sept. 2021, Baker Hughes says
(3) Bloomberg (May 19, 2023) – Oil Drilling Plunges the Most in Two Years With Shale Producers Pulling Back