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US oil, gas rig count jumps 4 to 461 on week, despite bitter cold snap: Enverus

The US oil and gas rig count grew four to 461 in the week ending Feb. 17, rig data provider Enverus said, despite a wave of bitterly cold, icy weather across the country that froze wellheads and caused widespread power outages temporarily shutting in as much as 4 million b/d of crude output.

Rigs chasing natural gas accounted for three of the weekly fleet additions, pushing their count to 122, while the oil rig count rose one to 339.

Now at 461, the domestic fleet is at its highest total since April 2020, when rigs were rapidly being pulled out of US fields to cope with plummeting crude prices as the pandemic tamped down demand.

Operators and analysts said wells shut in from the recent freezing weather have begun to be restored in the last day or two and are expected to be mostly online over the weekend.

The freeze catapulted oil and gas prices much higher for the week, according to S&P Global Platts prices.

Most noteworthy were gas prices, which shot into the stratosphere. Henry Hub prices averaged $13.11/MMBtu, up $9.84, while at Dominion South the average was $5.47/MMBtu, up $2.43.

For oil, NYMEX WTI averaged $59.73/b, up $2.11; WTI Midland crude averaged $60.84/b, up $2.30; and Bakken Composite prices weighed in at $57.88/b, up $1.88.

A flat focus

But despite higher oil prices, upstream operators have pledged in recent months to more or less maintain their activity and production levels, keeping output growth confined to 5% or less on year, as investors have not rewarded higher production in the last several years and over-production has resulted in extreme price volatility and frequent downturns.

E&P operators are “staying true to their word” and sticking to a disciplined approach to capital spending, RBC Capital analyst Scott Hanold said. “So far we show capital budgets flat to slightly down year over year.”

That austerity might at first glance suggest a flat rig count that would prevent producers from adding production, but the rig count should gradually drift up this year as operators optimize acreage, drill on newly acquired lands and take advantage of higher prices, said Andrew Cooper, analyst at S&P Global Platts Analytics.

“Even at $60/b oil, the E&P focus this year will be to continue cash flow positive,” Cooper said. “So, it is highly unlikely [operators] change their focus to production growth, as we expect a gradual recovery as operators focus on shareholder interest, such as paying down debt, optimizing best acreage for stronger well results, and bettering their ESG practices.”

Cooper said Platts Analytics’ 2021 rig count forecast was revised from 630 by year-end to 570.

Permian loses 3 rigs

The various US basins saw hodgepodge of ups and downs in rig counts for the week.

The frac spread count, which measures the crew and equipment units devoted to completing drilled wells, slumped the week heading into the cold snap, dropping by 15 to 161, according to Primary Vision, Evercore ISI analyst James West said.

The Permian Basin of West Texas/southeast New Mexico was one of the worst-hit domestic plays by the big freeze in the past week. It lost three rigs week on week for a total 205. The Permian had posted gains in each of the previous five weeks, growing 32 rigs from a total of 176 in the week ending Jan. 6.

“[The] Permian continues to reap the benefits of large-cap E&Ps refreshing their capital spending programs,” West said. “The outlook for the North America oilfield market is one of modest improvement through 2021.”

Also losing three rigs was the Haynesville Shale of East Texas and Northwest Louisiana, leaving 47.

But the Bakken Shale (15 rigs), sited in North Dakota and Montana, and the DJ Basin (12), mostly in Colorado, each gained two rigs.

The Eagle Ford Shale of South Texas gained one rig for a total of 36, marking the highest count in the basin since April 2020.

Unchanged on the week were the SCOOP-STACK in Oklahoma at 16, its fourth week at that level, and the Utica Shale, mostly in Ohio, at 10.
Source: Platts

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