The number of U.S. oil and gas rigs jumped by 30 in the week ending March 3 to 491, platform data provider Enverus said, reaching the highest total since late April 2020, as WTI oil prices climbed near the mid-point of $ 60 / bbl amid a favorable outlook at major energy conferences.
Oil rigs accounted for the vast majority of the week’s gain, rising from 27 to 366, while rigs chasing natural gas rose three to 125.
The Permian Basin, located in western Texas and southeastern New Mexico, was clearly the area for growth, with a weekly increase of 12 for a total of 222. Platform totals in the Permian are now at their maximum since the end of April 2020.
“While on paper this looks like a huge win over week, in general it was a big recovery that was needed after two straight weeks of flat rigs for the US shale. Said Andrew Cooper, analyst at S&P Global Platts Analytics.
The big jump of the week may have been an “accumulation” of the slowdowns of recent weeks due to the winter frost that hit the United States in mid-February, platforms finally mobilized on the ground after delays said Platts Analytics analyst Parker Fawcett.
The frost hit the Permian and Eagle Ford shales particularly hard in South Texas. At most, up to 4 million b / d of the 11 million b / d of total US oil production was offline, although most of it was quickly restored within days.
“I would expect the next few weeks to see more regular additions as we’ve seen over the past few months,” said Fawcett.
The constraint continues
At the annual CERAWeek by IHS Markit energy conference this week, enthusiasm for the future of upstream oil and gas over the next two decades was evident, despite what many believe to be an increasing use of sources. renewable and alternative energy by the middle of the century; a movement that even oil and gas producers have started to embrace.
For now, upstream players have repeatedly renewed their wishes not to contribute to supply-demand imbalances. At CERAWeek, they reiterated that they would stick to rigorous capital budgets and growth targets of 5% or less per year and return large sums to shareholders, while continuing to reduce costs, improve efficiency and look for ways to reduce their carbon footprint.
Oil prices which topped WTI $ 60 in recent weeks served as the backdrop for discussions at the conference, with rumors that a year of under-activity in 2020 could push prices even higher in the 18 next months or so.
“If you start to take an interest in the prices offered by developers, like $ 70 / bbl to $ 75 / bbl of oil, you can return both a huge amount of money to shareholders and [production] growth, ”said Raoul LeBlanc, vice president of North American unconventional products, analyst at IHS Markit, during a CERAWeek panel.
He noted that while the former is currently being appreciated by investors, growth, at least strong growth, is not.
LeBlanc said producers would almost certainly continue with austere schedules in 2021, but suggested that next year, if prices rose further, their appetites could overcome their will.
WTI averaged $ 61.35 / bbl in the week ending March 3, up 13 cents a week, according to S&P Global. The WTI Midland averaged $ 62.28 / bbl, down 8 cents, and Bakken Composite averaged $ 60.40 / bbl, up $ 1.04.
Natural gas stabilized on the downside as prices continued to stabilize following the impact of the US freeze. Henry Hub’s prices were on average $ 2.74 / MMBtu, down $ 1.43 per week, and Dominion South was on average $ 2.32 / MMBtu, down 58 cents.
‘A little more juice ‘at $ 50 / b-more oil
In the meantime, oil producers are profiting from the race with higher revenues, and some continue to add rigs. In the past week, the largest domestic fleet addition came from Occidental Petroleum, which purchased two rigs, bringing its number to 15, Cooper said.
“The independents are still there,” Stephen Richardson, analyst at investment bank Evercore ISI, said in a recent company podcast. “There’s a little more juice in the $ 50 / b-plus system. We don’t think you will see market support or industry support for any “material growth” in oil production.
DJ, Haynesville sees gains
Aside from the large Permian gain, most of the eight largest national basins gained platforms this week, two of which held up, according to data from Enverus.
Colorado’s DJ Basin and the gas-prone Haynesville Shale each bought three rigs. That brings the Haynesville to 47 and the DJ to 14, a level the latter pool hasn’t seen since mid-April 2020.
In addition, the Eagle Ford and the Utica Shale, a mostly gas / liquids game primarily in Ohio, picked up two rigs each for respective totals of 37 and 12. This is the highest tally for Eagle Ford since mid-April 2020, while the Utica has now rolled out of its stagnant eight to ten platform lineup so far this year.
The SCOOP-STACK game in Oklahoma increased by one for a total of 17.
The Marcellus Shale, primarily in Pennsylvania, and the Bakken Shale, primarily in North Dakota, saw no change this week. This kept Marcellus’ total at 34 and the Bakken at 14.