Hart Energy Unconventional Activity Tracker (Week of July 20, 2020)

U.S. Rig Count Falls to Record Low of 279; Oil and Gas Production Plummets

On July 15, the U.S. rig count fell to a record low of 279, according to Enverus Rig Analytics.

The demand destruction caused by the coronavirus pandemic and stay-at-home orders, mixed with an already oversupplied oil market, has halted activity more significantly than the late 2014-16 downturn, the firm said.

In that last crash, the U.S. rig count fell to a low of 421 in early May 2016 after hitting a record 1,980 rigs in late November 2014. In the “lower for longer” environment that followed the bust, the rig count in the U.S. peaked at 1,366 in mid-November 2018.

According to Enverus’ daily rig count, the U.S. count bottomed at 278 on July 8 and added 11 rigs by July 12. As of July 15, the count is still down 4.8% in the last month and down 72% in the last year. WTI is hovering around $41/bbl, which is nearly double the price that spurred drastic industry-wide capex cuts, suspension of many drilling and completion programs and significant curtailments.

The drop in activity has already resulted in a record drop in oil and gas production in the U.S.

During April, oil production decreased by 670,000 bbl/d and gas output fell by 2.6 Bcf/d, according to the Energy Information Administration’s latest monthly crude oil and natural gas production report.

Production declines of that magnitude, the report noted, usually arise only in natural disasters such as hurricanes. The latest drop in oil production was the largest since September 2008 when two hurricanes caused production to fall by 1.03 million bbl/d. Further, the April decline in natural gas production was the largest monthly decrease since Hurricane Isaac-related shut-ins in August 2012.

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