International
US oil and natural gas rig count drops as Permian production climbs
US oil and natural gas rigs fell by 13 to 1,061 for the week ended May 29, continuing a downtrend that has been largely in place since November, according to data released Thursday by S&P Global Platts Analytics.
Last week saw a brief rebound to 1,074, up by six, as the rig count entered its seventh month of general decline.
The rig count has dropped steeply since late last year, when it peaked at 1,299 rigs in mid-November.
The slippage in this widely watched metric is tied mostly to a new capital discipline by operators, rather than the direction of commodity prices, which had been favorable at more than $60/b when the rig count slide began in mid-November.
That circumspect attitude is sure to be reinforced by the recent drop in oil prices caused by the economic apprehension over the US-China trade dispute.
Once again, oil-directed rigs took the brunt of the fall, accounting for 11 fewer rigs this week at 849, while rigs targeting natural gas slipped by two.
Offshore rigs — which generally aren’t as sensitive to month-to-month commodity price changes as are land rigs because of their typically longer contracts — gained one rig over the prior week and six rigs year-on-year.
Horizontal drilling, which for a long time has commanded the lion’s share of well orientation industry-wide, saw its grip on the rig count slip another 17 units to 85.8% of the total, down from last week’s 86.3%. Horizontal drilling was 87.3% of the total a year ago.
This week’s declines were thinly spread out across most of the major oil and gas plays. The Bakken and Eagle Ford shale plays each lost two rigs while the Marcellus and SCOOP/STACK lost one each.
The Permian fell by three to 447. But the Anadarko Basin, home to the SCOOP/STACK, saw the biggest year-to-year change, with a decline of 42.
The only major onshore play to add any rigs over the past week was the Haynesville, which added two to 57.
PRODUCTION NOT SLOWING
The Permian has lost about 30 rigs since the beginning of the year, but the decline is not really slowing production. Crude oil production averaged 4.387 million b/d during May, according to Platts Analytics. It is projected to average 4.52 million b/d in July.
And despite takeaway capacity issues for natural gas in the Permian, output continues to grow there as well. After averaging 9.28 Bcf/d in May, Permian gas output is projected to grow to 9.63 Bcf/d by July.
One reason for the steady production growth over the past six months is the extremely high number of drilled but uncompleted wells (DUCs) in the Permian.
At 2,113 DUCs in April, the Permian accounted for almost half of the oil-directed DUCs in the US, according to Platts Analytics. When gas-directed DUCs are included, the total number of US DUCs is 5,440.
Over the past week, the most drilling permits occurred in the Denver-Julesburg (57) and the Permian basins (136), Platts data showed.
Overall permits dropped by 223 to 757.
But the Permian Basin accounted for most of the reduction in permits, down by 61 to 136; the D-J permit count totaled 57, a gain of 56 on the week — apparently the previous low count was related to weather disruptions.