US oil, gas rig count falls by nine as gas-focused drilling slows

The US oil and gas drilling rig count fell nine to 863 in the week ended Dec. 21, S&P Global Commodity Insights data showed Dec. 22.

An eight-rig slide in the number of gas-focused drilling rigs to 184 comprised the bulk of the weekly decline, while the number of rigs chasing primarily oil dipped one to 679.

Most of these idled gas rigs were found outside the major plays, however. Rig counts in the eastern Marcellus and Utica shale play declined by two and one, respectively, to 33 and 14, but the number of rigs active in the southern Haynesville basin was steady at 81.

In contrast, Permian basin rig counts climbed to 354, testing the top of its recent range, and Bakken drillers added three rigs for a total of 44—a six-week high.

Despite the increase in Bakken rigs, severe weather in the region has blunted output. Sub-zero temperatures and heavy snow in the past week have seen gas production in the Bakken fall to 1.46 Bcf/d Dec. 19, the lowest level recorded since late April of this year and the lowest mark recorded in December since 2017, according to S&P Global Commodity Insights data.

Meanwhile, around 300,000-400,000 b/d of oil production was shut-in in North Dakota by the recent storm, with the bulk of that output not expected to be restored until 2023, according to North Dakota Department of Mineral Resources director Lynn Helms.

US begins SPR repurchases

In a move designed to support prices and provide forward certainty for producers, the US Department of Energy Dec. 16 announced plans for its first repurchase of oil to begin replenishing the Strategic Petroleum Reserve. The move comes after an unprecedented 180 million barrel release over several months to combat energy price hikes that Russia's invasion of Ukraine spurred.

The DOE issued a solicitation for up to 3 million barrels of sour crude for delivery in February to the Big Hill SPR site in Texas.

Analysts at ClearView Energy Partners said the relatively small volume of the buyback was likely a test of the DOE's new fixed-price contracting authorities.

"Further buybacks could follow if the department judges the test to have been successful," they said in a Dec. 16 research note. "We think that could potentially happen as soon as [first or second quarter] 2023, even if delivery does not occur until FY 2024 or beyond. The timing could reflect several considerations, however."