New York — The US oil and gas rig count edged down 3 to 285 in the week ended Aug. 5, rig data provider Enverus said, as Permian counts fell back to early July lows.
The number of oil-focused rigs fell four to 198, falling below 200 for the first time since early July, but still eight off the low of 191 seen during the week ended July 1. The number of rigs chasing gas ticked up one week on week to 87.
Rig count declines were concentrated in the West Texas Permian Basin, where operators idled seven rigs for an active total of 131, putting the basin rig count back at its recent low seen in early July.The Bakken play shed one rig for a total 11, and a single rig exited the Marcellus shale basin, putting the total active there down to 25.
But a slight rig count recovery extended in most other basins. Operators added one rig each in the Denver-Julesburg, Utica, and Eagle Ford, putting the total number of rigs active in those basins up to six, eight and 11, respectively.Rig counts in the Haynesville basin and SCOOP-STACK play were steady for a third week at 33 and 11, respectively.
Permian operators remain cautious
Permian operators have so far indicated they will take a cautious approach to ramping up drilling activity amid uncertain demand outlooks. Centennial Resource Development has now relaunched activity, with several well completions starting in the third quarter and plans to add a rig toward year end, its top executives said Aug. 4.
But another Permian operator, Diamondback Energy, sees maintenance instead of new well development to be the key to its second-half operations, CEO Travis Stice said in a separate second-quarter call. Diamondback dropped its rig count in Q2 to six from 20 and turned no wells to production in June.
Large-scale Permian producer Concho Resources said July 30 its full-year 2020 production and capital expenditure expectations will remain unchanged at 197,000 b/d and $1.6 billion, respectively. However, the company now expects to average eight active rigs, down from 11 during the second quarter.
At the bottom?
Despite a second week of falling rig counts, the nationwide total was still six higher than the most recent low seen during the week ended July 8, and most analysts now believe the industry rig count bottom has arrived.
The US rig count is “so close to [bottom] to be moot. It’s the lowest rig count ever recorded,” said Jim Wicklund, energy analyst for investment bank Stephens, Inc., in an Aug. 1 note.
“There is a lot of optimism out there around oil prices moving up well by mid-2021, and we hope they are right, but stable or just higher would both work in a pinch,” Wicklund said. “The rig count might be ‘structurally’ lower for the next few years and maybe forever, but there will still be the need to drill, produce and transport, as well as cleaning everything up along the way.”
S&P Global Platts Analytics forecast the US rig count to remain relatively flat until early 2021. That year, operators will be keenly awaiting “several months of sustained higher oil prices before starting to gradually increase rigs,” Platts Analytics said in an Aug 3 report. “In the meantime, we expect operators to take advantage of the relatively higher oil prices and the large DUC [drilled but uncompleted] inventory to increase well completions.”
The number of DUC wells often increase during a price downturn as operators, unwilling to increase output and sell at low prices, use the remaining time on their drilling rig contracts to drill wells that can be easily completed in the future.
The number of DUC wells across the major US basins climbed 35 in June to 7,659, according to the latest US Energy Information Administration Drilling Productivity Report. The biggest jump was in the Permian, which added 49 additional DUCs for a total 3,488.