US oil, gas rig count gains three, totaling 806 on week; Bakken highest since April 2020: Enverus
The US oil and natural gas rig count gained another three rigs on the week, for a total 806 rigs which is well within shouting distance of pre-coronavirus pandemic levels, energy analytics and software company Enverus said May 12.
Moreover, the giant Bakken oil reservoir in North Dakota/Montana has now reached its highest rig level since early April 2020. That was just a month after the pandemic struck the energy industry forcefully and oil prices dropped due to low global demand.
“We do foresee continued headwinds in the form of labor shortages among the service sector, specifically on the completions crews side of things,” said Taylor Cavey, senior analyst-supply and production for S&P Global Commodity Insights.
Both oil-weighted and natural gas-driven plays in the eight largest domestic unconventional basins posted rig gains during the week ended May 11, Enverus figures showed. Oil rigs gained two for a total 623, while the gas rig count rose one to 183.
Rig count nears pre-pandemic level
This week’s 806 rigs is inching closer to the pre-pandemic level of 838 rigs working in US domestic basins for the week ended March 4, 2020. Only a few days later, the price of oil was in the low $30s and the pandemic – which was already ongoing outside the US – had effectively settled into the energy industry.
The oil and gas patch entered April 2020 at 721 rigs, a drop of 117 rigs or 14% in less than a month.
After hitting bottom in early July 2020 at 279 rigs, the US fleet began to rise and has been inching forward ever since. Total US rigs crossed the 400-mark by the first week of January 2021 and numbered just over 700 in early January 2022.
During the week ended May 11, the Permian Basin posted the most change with a four-rig gain, making 329. While the West Texas/New Mexico basin has seen its upticks and setbacks since then and has been mostly rangebound since mid-March, it has gained 30 rigs or 10% this year.
The Permian has also led permitting activity, which in April 2022 was up by 244 or 16% on the month, according to James West, an analyst for Evercore ISI Group, a boutique energy investment bank.
The giant oil and natural gas play, which is the largest oil reservoir in the US with production of just under 5.2 million b/d of oil and 15 Bcf/d of gas, led “strong activity across all basins” in April, West said.
“Besides slight decreases in the Utica (-7, -100% m/m) and in other smaller plays (-6, -2% month on month), permitting activity grew in all basins,” he said. “Relevant increases occurred in the Permian, the Marcellus (+148, +157%), the Powder River Basin (+87, +32%) and the DJ-Niobrara (+84, +138%).”
The Marcellus Shale is sited mostly in Pennsylvania/West Virginia; the Powder River Basin in Wyoming and the DJ-Niobrara largely in Colorado.
Highest permit level since H2 2019
Moreover, “last month we noted the month of April has historically reported a decline, averaging a 25% fall in a monthly basis between 2017 and 2019,” West said. But “as we expected, the effects of events such as international bans on Russian oil had a clear effect over that trend this year. April’s activity levels were the highest recorded since September 2019, a two-and-a-half-year high.”
With a total count of 4,057 permits filed in April, the month’s permitting outpaced 2021 and 2020 levels by 133% and 278% respectively, he said but added the monthly count lags 2019 levels by 8%.
Meanwhile, the rig count in other basins for the week ended May 11 was a tickle of slight ups and downs. The SCOOP-STACK of Oklahoma and the Haynesville Shale in East Texas/Northwest Louisiana – a dry gas play – each added two rigs, bringing their counts to a total 45 and 71 respectively.
Adding a rig each were the Bakken Shale, which is now at 40 rigs, which as noted is its highest level since April 2020, and the Marcellus Shale, now at 45 rigs.
Unchanged from last week were the Eagle Ford Shale of South Texas, staying at 68 rigs, and the Utica Shale, remaining at 11. Only one basin lost rigs: the DJ, which fell by one leaving 20 rigs.
Evercore’s West, in his April permitting report, also noted the US Bureau of Labor Statistics signaled a “positive outlook” for both oilfield services and upstream employment.
“The BLS reported a 1.2% increase in the number of mining support activity (our proxy for oilfield services) employees in April,” he said. “The count is now 17% up on a year over year basis.”
E&P employees in the US also increased over the month by 3.9%, growing 17.4% on a year-to-year basis, he said.