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29 Apr 2021 | 19:25 UTC — New York
Highlights
Gas rigs jump 5 to 131, highest since April 2020
Oil rigs up 3: Permian adds 2, Eagle Ford drops 5
New York — The US oil and gas rig count climbed eight to 538 in the week ended April 28, rig data provider Enverus said, as the number of active gas rigs hit a one-year high.
The number of rigs primarily chasing gas rose five to 131, the highest since the week-ended April 1, 2020, while those chasing oil climbed three to 407, leaving the oil rig count still 12 shy of the 419 active during mid-April.
Rig counts were higher across most of the major named gas-focused basins. Haynesville operators added five rigs for a total 53 active in the basin, the highest since at least January 2020, and the Marcellus basin rig count was up one at 36, a 13-month high.
Operators in the Utica basin idled one rig, putting the number active there down to 13.
While the number gas-focused drilling rigs active nationwide was still down 11% from pre-pandemic levels seen in early March 2020, they have climbed sharply from a deficit of as much as 42% seen in mid-July. In contrast, the number of oil-focused rigs active last week was still 41% behind pre-pandemic levels.
The rise in gas drilling activity comes amid surging demand for US Gulf Coast exports.
In April, US exports to Mexico are averaging their highest level on record at over 6.1 Bcf/d. Feedgas deliveries to terminals in Texas and Louisiana, meanwhile, are setting their own record high this month, averaging over 10.5 Bcf/d.
At the Houston Ship Channel and Katy Hub, cash basis is up around 21 cents and 16 cents, respectively, this month compared with last, with both locations now trading at premiums to the US Henry Hub benchmark. In South Texas, basis prices at Texas Eastern STX and NGPL STX have made smaller gains of about 8 cents each, still rising from discounted territory last month to now modest premiums, S&P Global Platts data showed.
While the Texas Gulf Coast has often traded up to modest price premiums to Henry Hub, those periods have often been short-lived. This time, though, it appears that the market is pricing in basis premiums over the longer term as it braces for a more enduring change to the region's supply-demand balance.
With overseas export demand growing, East Texas gas traders are pushing forward prices higher at hubs like at Houston Ship Channel and Katy, where supply is expected to continuing tightening.
At both locations, summer basis is pricing as high as 13 cents over Henry Hub for July and August. For the peak-winter demand month of January 2022, the two hubs are priced at a 22 cent premium.
While the overall trend in oil rig counts was higher, basin level rig counts were mixed.
Permian operators added two rigs, putting the total active there at 233, but in the Eagle Ford basin rig counts were lower for a second straight week, falling five to 38. It was the largest one-week drop in Eagle Ford rig counts since the week ended Jan. 20.
Drillers added one rig in each of the SCOOP-STACK and Williston basins, putting the number of rigs active in those plays up to 19 and 16, respectively.
But rig declines extended in the Denver-Julesburg basin, where operators idled a single rig leaving just 11 active in the play, a nine-week low.
The US Interior Department has approved more than 500 drilling permits on federal lands and waters since January, and operators hold nearly 8,000 permits that are ready to use, despite the Biden administration's indefinite ban on leasing sales, an official told Congress on April 27.
Drillers have submitted another 5,600 permit applications for consideration, Nada Culver, Bureau of Land Management deputy director of policy and programs, told the Senate Energy and Natural Resources Committee during a hearing on Interior's leasing review.
The Biden administration has halted lease sales for federal acreage both onshore and offshore at least through June while it reviews the program.
S&P Global Platts Analytics estimates a permanent ban on federal leasing would lower US onshore production by 1 million-1.2 million b/d in the next five years or by as much as 1.6 million b/d if operators with existing leases are not able to get new permits, which it considers unlikely. Risks to offshore production would not show up for at least 10 years.