US E&Ps Could Drop Up to 100 Rigs at New Low Oil Price

At least 50 and up to 100 of the roughly 600 rigs drilling in the Lower 48 may be idled in response to the newly discounted $62/bbl WTI strip, according to a new J.P. Morgan Securities analysis.

And the cuts may come quickly, according to Truist Securities. “Our conversations with several E&Ps suggest reductions could soon come if WTI stays near $60/bbl for several more days,” Truist analyst Neal Dingmann reported.

The prompt-month contract for WTI was $63.71 on April 16, according to CME Group, down from $75 in mid-January and $72 on April 2.

The 12-month strip was $62.14; the 36-month strip, $60.05.

J.P. Morgan Securities analyst Arun Jayaram reported that private E&Ps, which have roughly half of all U.S. rigs at work currently, are likely to drop iron first.

Rig operator Precision Drilling is most exposed to private operators’ capex plans, with 75% of its iron currently at work for private E&Ps.

Oklahoma first

By basin, both private and public E&Ps could first idle D&C in the SCOOP/STACK play in Oklahoma’s Anadarko Basin where the average breakeven is about $84 for a 25% internal rate of return (IRR).

This would be followed by drilling in Wyoming’s Powder River Basin, which has a breakeven of $79.

Next, activity in the Bakken ($66) and the Eagle Ford ($67) would fall, Jayaram wrote.

The biggest of them all—the Permian Basin—would get hit at WTI below $57.50, he added.

“Assuming sustained WTI oil prices of $60/bbl, we think 50 oil rigs could be dropped, with up to 100 rigs at risk if oil prices are sustained at $55/bbl or lower,” Jayaram wrote.

Truist Securities analyst Neal Dingmann reported “warning shot fired” upon news April 16 from Diamondback Energy that it is reviewing its 2025 capex plans.

One of the Permian’s largest operators, it produces some 476,000 net bbl/d from the basin. It told investors, “Should low commodity prices persist or worsen, Diamondback has the flexibility to reduce activity to maximize free cash flow generation.”

Dingmann noted, “The [producer’s] comments are the first public remarks suggesting less rigs and other activity should low oil prices persist.”

Private E&Ps

J.P. Morgan’s Jayaram forecasts “private activity in oil and combo plays could be more at risk in the current macro environment with private rigs likely the first to be cut in this macro-setting.”

Privately held operators currently have 285 rigs at work or 48% of the total U.S. rig count of about 600 in both oil and gas plays.

By oil play, 81% of rigs in the Powder River Basin are drilling for private operators; 81%, Midcontinent; 50%, Eagle Ford; and 48%, Bakken.

Among rig operators, 75% of Precision Drilling’s rigs are contracted by private E&Ps; 51%, Patterson-UTI Energy; 36%, Ensign Energy Services; 32%, Nabors Industries; and 23%, Helmerich & Payne.

“Under our 50-rig-decline scenario, we estimate U.S. oil and gas production would decline by [about] 500,000 bbl/d and 1.5 Bcf/d by the end of 2026, rising to 1 MMbbl/d and 3.0 Bcf/d under the 100-rig scenario,” Jayaram wrote.

Demand outlook

J.P. Morgan’s commodities analysis team pared their WTI price outlook to average $62, down from $73, through 2025 and $53 through 2026 in anticipation for less oil demand growth globally and OPEC+ plans to put more barrels into tankers.

Rather than 2025 daily demand growing by 1.1 MMbbl as was expected earlier this year, the analysts now expect 800,000 bbl instead.

“Crude oil prices have come under significant pressure from a double whammy associated with the U.S. tariffs and the surprise OPEC+ decision on April 3 to return an incremental 411,000 bbl/d of oil output in May, which was three times the expected increase,” Jayaram wrote.

Without any change in reduced global economic growth projections or in OPEC+ plans, the current trajectory “could push balances into a large surplus and drive Brent down below $60 towards year-end,” the commodities team concluded. 

Brent is typically about $4 more than WTI, thus a $60 Brent price would likely result in a roughly $56 WTI price.