Rig Count Continues Decline

For seven weeks in a row, the rig count is down, which implies upcoming declines in domestic crude output. The total active U.S. rig count fell by 57 to 408, according to Baker Hughes Co. data. As of April 29, the total U.S. rig count is down 33 from last week to 415.

According to the Energy Information Administration (EIA), the number of active natural gas rigs in the U.S. fell to 85 on April 21, the lowest number of active natural gas rigs since August 2016. As of that date, there were 38 fewer (31%) active natural gas rigs than at the beginning of 2020 and 101 fewer (54%) than last year at the same time.

Natural gas-directed rigs remained concentrated in the Marcellus Basin in Ohio, Pennsylvania, and West Virginia and in the Haynesville Basin in Louisiana and Texas. These two basins accounted for 50% of the decrease in natural gas-directed rigs over the past year, and 78% of remaining natural gas-directed rigs in the U.S. operate in these basins.

In 2019, production rose even though the rig count decreased, reaching a record-high 96.3 Bcf/d of dry natural gas production in November. Since then, dry natural gas production has declined as relatively low natural gas prices have diminished the economic incentive for producers to drill new natural gas wells. Similarly, associated natural gas production has fallen as the lower price of oil has reduced the incentive to drill oil wells.

Completion of drilled but uncompleted wells (DUCs) has likely offset some of the decrease in production from newly drilled wells, according to the EIA’s most recent drilling productivity report. As of March 2020, the number of DUCs was 13% (1,052 DUCs) lower than the peak in May 2019. This drop indicates that more wells are being completed than are being drilled.

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