US oil, gas rig count falls 6 to 732 on week, new recent lows set in Bakken, Marcellus Shales

The US oil and gas rig count shed six rigs leaving 732 for the week ended July 5, with both the Bakken Shale and Marcellus Shale setting new recent low levels in the mid-20s not seen since 2021, an analysis of S&P Global Commodity Insights data showed.

The Williston lost the most rigs of any of the eight large domestic unconventional plays – eight rigs – leaving that basin's rigs in the mid-20s, a level not seen since October 2021, the July 13 analysis showed.

And, the natural gas-prone Marcellus Shale dropped five rigs, leaving 25 -- also a level not seen since September 2021.

Moreover, gas-oriented rigs dropped a total of five rigs to 145, while oil-directed rigs lost one to 592, the numbers showed.

Analysts have expected a loss of gas rigs at current gas prices below $3/MMBtu. On July 12, front-month natural gas settled at $2.632/MMBtu, down 99 points.

Most of the largest basins gain rigs

However, except for the Eagle Ford Shale, which lost one rig leaving 57, the other five large unconventional basins gained rigs.

The Permian Basin and DJ Basin both gained two rigs each, which put the Permian at 342 and the DJ at 17. The Haynesville Shale, SCOOP-STACK and Utica Shale all each gained a rig apiece. That put the gas-prone Haynesville at 54, the SCOOP-STACK at 32 and the Utica at 13.

The total US oil and gas rig count has how lost 134 rigs since starting 2023 at 866 rigs, according to S&P Global data. A little more than half of dropped rigs -- 70 -- were lost since the last week of April.

Operators held off dropping rigs in the first few months of the year hoping commodity prices would rise, energy consultants Rystad Energy noted, but later decided to cut drilling and completions activity "as they accept the new reality of a lower and more volatile price environment."

"It is going to take some time for operators to gain confidence to deploy rigs and fleets back even if the price environment improves," the consultancy said in a June 27 website statement. "[The] factors highlighted above suggest that activity is to remain at a lower level in the coming months and all signs are pointing to oilfield service pricing possibly already peaking this year."

'Cautionary tone'

"Oilfield services companies have offered more of a cautionary tone in their latest earnings calls, in contrast to a more bullish 2023 tone that was struck in the earlier three months," Rystad added. "Services companies are also worried about losing personnel when they stack equipment, after only just replenishing their ranks vacated during the lockdown. The labor market is still tight and hence service companies will face an uphill task in recruiting and training personnel should the market pick back up in the second half of 2023."

However, employment in the US oilfield services and equipment sector increased by 45 jobs in June, remaining steady even as the broader labor market slows, according to the Bureau of Labor Statistics after adjustments to May numbers and an analysis by the Energy Workforce & Technology Council.

The continued gains bring the sector to its highest level since March of 2020 to reach 665,258 on the month in June, according to preliminary data from the BLS, the council said in a July 7 statement.

"While overall the labor market is cooling and the jobs market is tight, the oilfield services sector is still hiring," council President Molly Determan said. "Our sector provides exciting and challenging career opportunities in an industry at the forefront of developing and deploying new technology."

But this could be a mixed blessing, according to long-time industry analyst Jim Wicklund, now a managing director for business development at investment bank PPHB, said in his weekly subscriber note July 7.

"Under other circumstances [a strong job market] would be a good thing but, in this market, it raises the likelihood of another Fed rate hike shortly," Wicklund said. "It now appears almost fait accompli. Higher interest rates devalue assets including oil, which puts another brick on the load of uncertainty surrounding the oil industry."