US oil, gas rig count jumps 5 to 715; represents first gain in six weeks

The US oil and gas rig count rose by five to 715 for the week ended Aug. 16, according to an S&P Global Commodity Insights data analysis – the first time the rig count has posted a net gain in six weeks.

Oil-directed plays added four rigs net, while majority gas plays added net one rig net. Those gains came from horizontal rigs, as vertical rigs decreased during the week, the analysis showed Aug. 24.

The Permian and Williston Basins – as well as the Marcellus Shale, a large gas basin – each gained multiple rigs. The Permian increased by three to 332, while the Williston was up seven to 35 and the Marcellus rose by four to 27. Another large gas-oriented basin, the Haynesville, increased by one rig to 48.

But the Eagle Ford Shale and Utica Shale were each down three rigs, leaving 53 and nine respectively. That is the Utica's lowest rig count since the first week in September 2022.

Also, the DJ Basin was down one to 17, while the SCOOP/STACK play was unchanged at 30. All eight of the largest domestic unconventional basins are below year-ago levels.

Rigs in the Permian – which has been the largest and busiest US basin – have fallen from the 350s in May. That has surprised many since its rig count had been stable since the second half of 2022 even as other basins lost rigs.

Total rig count down 150 in 2023

So far in 2023, the total rig count has lost more than 150 rigs, of which more than half (87) came off in the past four months.

While softer commodity prices account for some of the drop, rigs are also declining due to oil and gas patch consolidation, according to East Daley Analytics.

"Producers involved in recent M&A deals in the [Permian's] Midland and Delaware sub-basins, either as buyers or sellers, started the year averaging 63 rigs," the consultancy said. "Through mid-August, rig counts for this sample of operators had fallen by 18 rigs, a decline of nearly 30%."

Rigs have mainly fallen for the acquisition targets, while the acquiring companies have kept their rig numbers mostly steady, EDA said.

While Permian Resources did not announce rig cuts in its latest deal announced Aug. 21 to acquire Earthstone Energy, many other acquiring operators guided to lower activity once their respective mergers closed, it added.

"We have seen these plans come to fruition, with rig counts for the acquired targets falling from 18 at the start of 2023 to only seven rigs in August," EDA said.

Meanwhile, for weeks the drumbeat on the rig count bottoming has been uppermost in E&P-watchers' minds, and the beat goes on pushing deeper into the third quarter.

Investors persistently ask about US onshore markets, Evercore ISI oilfield services analyst James West said in an Aug. 22 investor note.

"The discussion still centers around when activity levels will bottom and what the recovery will ultimately look like, [and] the message from operators has remained consistent throughout earnings season: that industry activity should bottom shortly," West said.

Some rig count growth seen in late 2023

"Many also expect rigs will be added back toward the end of this year as privates respond to higher commodity prices and large publics will want to setup their drilling programs to hit production targets for 2024," he said.

Based on current levels of drilling efficiencies, the rig count will need to increase by about 80 rigs to hit E&P operators' 2024 growth expectations, Kimberlite Oilfield Research President David Bat said in an Aug. 16 webinar chat with West.

Bat predicted the Lower 48 rig count will exit 2023 at 642 (using Baker Hughes land rig numbers which stood at 625 for the week ended Aug. 18).

"While the market overall remains at a healthy level, the rig count will need to increase to over 700 in 2024 to meet operators' drilling projections," Bat said.

That may roughly equate to 800 for the S&P Global rig count, with numerical differences based on different counting methodologies.

Bat said his research shows that US land is on pace to drill about the same number of wells in 2023 versus 2022. But he added 2024 wells may rise about 2.9% which will necessitate a higher rig count.

As for hydraulic fracturing, West said the active "frac spread" count – that is, hydraulic fracturing units of crew and equipment that complete and ready wells for production – appears to have bottomed out in the 260s level.

"While pricing concessions are happening, the industry is remaining very disciplined in anticipation of higher activity levels in 2024," he said.

According to S&P Global, the US "frac" spread stood Aug. 24 at 256.