U.S. drillers in the third quarter added the most oil rigs of any quarter since 2014, according to a closely followed report on Sept. 30, but the pace of additions has slowed as crude holds below $50 a barrel (bbl) despite OPEC's first plan in eight years to cut output.
Drillers added seven oil rigs in the week to Sept. 30, bringing the total rig count up to 425, the most since February but still below the 614 rigs seen one year ago, energy services firm Baker Hughes Inc. said.
For the quarter, they added 95 rigs, the most since drillers added 105 rigs in the first quarter of 2014. The oil rig count plunged from a record high of 1,609 in October 2014 to a low of 316 in May after crude prices collapsed in the steepest collapse in a generation due to a global oil glut. That decline continued through the first half of this year when drillers cut 206 rigs.
So far this quarter, however, drillers have added or at least not removed any oil rigs for 14 weeks in a row, the longest streak of not cutting rigs since 2011. That was also the third-longest streak of not cutting rigs since 1987, following a 19-week streak in 2011 and a 17-week streak ended in 2010.
U.S. crude futures were on track to their largest weekly advance in more than month on Sept. 30 at above $48/bbl after OPEC agreed to cut output, edging closer to the $50/bbl mark that drillers say make a return to the well pad viable.
In the short-term, analysts noted the rig count could decline if small, privately held operators pull back on drilling plans, choosing to conserve capital if prices remain low. Longer-term, however, analysts forecast the rig count would jump higher in 2017 and 2018 when prices were expected to rise as bigger publicly traded operators boost spending on drilling to increase production.
Futures for calendar year 2017 were trading above $51/bbl, while calendar year 2018 was above $53/bbl. Platts RigData, a forecasting unit of S&P Global Platts, projected total oil and natural gas land rigs would rise from an average of 449 in 2016 to 579 in 2017 and 676 in 2018 as energy prices increase. That compares with an average of 883 rigs in 2015.
Recommended Reading
Q&A: NOG’s O’Grady on Facing Industry Reputation’s Formidable Headwinds
2023-10-10 - Northern Oil Gas CEO Nicolas (Nick) O’Grady spoke last week in Dallas at the A&D Strategies conference with Pietro D. Pitts, Hart Energy’s international managing editor, to discuss his views on the changing of the guard of sorts that the oil and gas industry is undergoing as it attracts a more diverse workforce.
Vital Energy Promotes Katie Hill to COO
2023-11-14 - Vital Energy is promoting Katie Hill to senior vice president and COO effective Nov. 13, the company said.
Private Equity Money is There - for the Right Teams
2023-11-19 - Private Equity executives agreed that the investment space is in a healthier state than at the height of the shale boom and funding is available for “really good teams.”
Henry Resources' Jim Henry, Permian Basin Wildcatter, Dies at 89
2023-10-19 - James “Jim” Henry, a longtime Permian Basin wildcatter who last month sold his company to Vital Energy, has passed away.
As Private Equity Funds Shrink, Strategies Shift to Mirror Publics
2023-10-03 - Private equity firms are seeking to make money through the drill bit and by buying noncore assets that large companies are shedding, while family offices are starting to make more aggressive moves.