US oil, gas rig count climbs 4 to 547 as Permian drilling hits 13-month high

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Highlights

rigs up 1; gas rigs climb 3

Permian rigs up 7 at 244

Bakken output to fall as DUC count declines

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The US oil and gas rig count climbed four to 547 in the week ended May 26, rig data provider Enverus said May 27, as Permian basin drilling activity pushed to a 13-month high.

The number of active oil-focused rigs climbed one to 424 while the number of rigs chasing mostly gas was up three at 123.

But the modest nationwide increase belies a steep increase in the Permian basin rig count, which climbed seven to 244 – the highest since the week ended April 22, 2020. It was the biggest one-week jump in Permian rigs since the week ended March 24.

Rig counts were mixed across the other major oil-focused plays. SCOOP-STACK rig count was up two at 24, the highest since April 2020, while Bakken operators added a single rig for a total 18, putting the rig count there at the highest since May 2020.

But the rig count was steady at 41, and operators in the Denver-Julesburg play dropped a single rig leaving a total 13 active in the basin.

Rig counts were mostly higher across the major gas-focused basins. Haynesville operators added two rigs for a total 52 active in the play, while the Marcellus basin rig count was up one at 34. Notably the dry portion of the Marcellus saw a gain of two rigs for a total of 22, while in the wet portion rig counts fell one to 12. The Utica basin rig count was steady at 11.

Bakken output to fall as DUC wells decline

Despite pushing to a one-year high last week, Bakken rig counts are still only around one-third of their prepandemic level seen in early 2020. Platts Analytics expected production to decline in line with the sharp decline in rig counts seen last year.

Instead, operators have relied on the basin’s large number of drilled-but-uncompleted wells and reduced flaring rates to not only uphold, but grow production, in recent months. But these forces are unlikely to maintain growth going forward as the number of DUCs dwindles and infrastructure constraints reduce anti-flaring efforts, according to a forecast by S&P Global Platts Analytics.

From May 2020 through April 2021, the number of Bakken DUCs dropped from 877 to 647, according to data by the US . Flaring rates in the Bakken also fell from 13% in March 2020 to 8% in February 2021, providing additional gas that previously would have been flared, according to the North Dakota Industrial Commission.

Platts Analytics therefore expects production to slide from 2.1 Bcf/d at the start of summer to 1.7 Bcf/d by October. The expects Bakken production to decline 55 MMcf/d month over month in June.

Longer laterals add headwinds to rig counts

At a time when squeezing out more oil and gas for less money is a priority for producers, longer laterals are giving a competitive edge in unconventional basins in the US, producing more hydrocarbons per foot drilled while requiring fewer active drilling rigs.

Laterals – the horizontal portion of a well, – have become longer and longer in the last 15 years. Drilling out 15,000 feet, or nearly three miles, horizontally reduces the number of wells companies need to drill to achieve their production goals and does it at increasingly lower costs.

That saves drilling time, surface equipment requirements and cuts downtime to move rigs and crews.

This toward longer laterals is likely a contributing factor to the fact that while counts are still down around 38% from their pre-pandemic level of around 690, US Information Administration reports that crude output is only down around 15% over the same period.

Author

Chris van Moessner

Editor

Derek Sands

Natural Gas, 
Oil

Source: Platts

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