US oil, rig count gains 2 to 619 on week as drill activity settles into new recent lows

The US oil and gas rig count gained two rigs, making a total of 619 for the week ended Dec. 11, an S&P Global Commodity Insights survey showed, as activity appeared to be settling at a recent new low range during the final weeks of 2024.

The oil-directed rig count for the week gained two for a total 515, while gas-oriented rigs were unchanged at 104, according to the Dec. 19 survey.

The total rig count has been below 700 for more than a year, but the past week is its third consecutive week below 620. Prior to that, rig activity had bounced around generally in the 630s since July.

The new low range may be traceable to the holiday season which will occupy the next few weeks and is typically a more sluggish activity period as E&P budgets are nearly exhausted and Christmas-New Year absences frequent.

But analysts expect a bit lower oil-directed rig count in 2025-2026 owing to projected lower commodity prices.

The last time the rig count was in the teens was more than three years ago – before mid-September 2021, as markets were beginning to emerge from the pandemic. But at the time, the rig count was headed up.

'Tricky investment environment' in 2025

"The US upstream landscape ... is shaping up as a tricky investment environment in 2025," investment bank Piper Sandler said in a December 17 investor note.

"E&Ps continue to deliver on strong operating efficiencies while remaining capital disciplined in the face of an uncertain macro environment," the bank said. "Overall sentiment has favored gas-weighted equity as last week saw our first big winter storage withdrawal (190 Bcf), LNG export facility start-ups approach and the power-demand outlook remains robust."

"On the oil front, while US [production] growth is decelerating in fiscal year 2025, the new administration is promising lower oil prices and Saudi/OPEC+ have ample spare capacity to make it happen," it said.

While US crude production in 2023 grew by 1 million b/d from January to the end of December, so far in 2024 it has grown by about 400,000 from January 2024, reaching about 13,600 b/d for the week ended Dec. 13.

Moreover, "OPEC+ is sitting on more than 4 million b/d of spare capacity after a pretty lackluster year of demand, including declines from China," Piper Sandler said.

Commodity Insights, in a Nov. 25 Future Energy Outlooks Quarterly Tracking Report, suggested the days of more than 1 million b/d of yearly crude oil growth from the US alone "are almost certainly over."

But, "the shorter lead time nature of shale production will allow for production to ramp up if balances are tight enough and prices are strong enough to call for it," the report said. "Overall, we project the trajectory of US production will mirror that of global oil demand, highlighted by decelerating growth over the balance of the 2020s and an undulating plateau in the late 2020s/early-2030s, followed by a structural decline thereafter."

But some uncertainty lies in the fact that the bulk of US oil comes from shale plays, and operators large and small continue to eke out drilling and well efficiencies. These continual improvements have been a key accomplishment of upstream operators for at least 10 years, lowering their costs but also their rig counts in the process and providing less work over time for oilfield service providers.

The current US rig count of 619 for the week ended Dec. 11 is down by 60 year over year or nearly 9%.

Efficiencies to persist in 2025

Efficiencies such as better well designs and improved identification of the choicest locations within an oil and gas formation should continue to improve well operations in 2025, assisted by artificial intelligence.

"We would not count out further nominal gains [to] come," Piper Sandler said. In particular, "[well] completion efficiency has stolen the show in 2024 as operators adopt new completion technology.. That includes both SimilFrac (completing two wells simultaneously) and TrimulFrac (completing three wells simultaneously).

"With an operator required to run five to six rigs ahead of a SimulFrac spread, the next leg of completion efficiency is pointing to more consolidation required for smaller operators to compete," the bank said, adding it forecasts its covered E&P companies will spend 5% less capex to deliver 1% oil and gas growth adjusted for acquisitions.

Investment bank Tudor Pickering Holt notes the private rig count has fallen in recent months -- with big drops on some weeks. For example, according to CI data, private E&Ps dropped nine rigs leaving 406 rigs for the week ended Nov. 27. It also fell six rigs to 421 during the week ended Oct. 30 and plummeted 13 to 414 the week ended Sept. 25.

For the week ended Dec. 11, the private rig count rose by five to 407, but is still substantially lower than its perch in the 420s ad 430s early in 2024.

"We see the potential for missing rigs to return to the dataset over the following weeks, notwithstanding market churn" or normal turnover of rigs as old contracts lapse and new ones begin, TPH said in its Dec. 16 daily investor note.

For the week ended Dec. 11, the Williston Basin saw the biggest change – up four to 40. Two natural gas-focused plays, the Haynesville Shale and Utica Shale, also gained rigs -- the Haynesville was up one to 38 and the Utica up two to 11.

But five basins shed rigs. The Permian Basin was down two rigs to 282 – a level not seen since the last week of 2021. The Eagle Ford Shale was also down two to 47 while the SCOOP/STACK, Marcellus Shale and DJ Basin were down by one each, leaving 25, 18 and 14 respectively.