U.S. energy firms this week added oil and natural gas rigs for a second week in a row as crude prices rose to their highest since 2018, prompting some drillers to return to the well pad.
The oil and gas rig count, an early indicator of future output, rose nine to 470 in the week to June 18, its highest since April 2020, energy services firm Baker Hughes Co. said its weekly report.
The total rig count was up 204 rigs, or 77%, over this time last year. It was also up 93% since falling to a record low of 244 in August 2020, according to Baker Hughes data going back to 1940.
U.S. oil rigs rose eight to 373 this week, their highest since April 2020, while gas rigs rose one to 97, their first increase in six weeks, according to Baker Hughes.
U.S. crude futures were trading below $72 per barrel June 18, close to its highest since October 2018.
With prices mostly rising since October 2020, some energy firms plan to raise spending after cutting drilling and completion expenditures over the past two years, although most are still focusing on capital discipline and investor returns, rather than expanding supply.
“We are maintaining a view that many shale producers will find current high prices too difficult to ignore and, as a result, (the government’s) reported increase in total U.S. production ... could easily be followed by additional gradual gains,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
U.S. crude production last week rose to 11.2 million barrels per day (MMbbl/d), its highest since May 2020, according to data from the U.S. Energy Information Administration (EIA) on June 16.
U.S. shale oil output usually responds rapidly to price signals and the EIA this week forecast production from seven major shale formations would rise 38,000 bbl/d in July to about 7.8 MMbbl/d.
However, OPEC officials heard from industry experts that U.S. oil output growth will likely remain limited in 2021 despite rising prices, OPEC sources told Reuters.
“The general sentiment regarding shale was it will come back as prices go up but not super fast,” said a source at one of the companies that provided forecasts to OPEC.
In fact, many analysts do not expect that extra spending to boost output at all. Instead, they think it will only replace natural declines in well production.
Recommended Reading
Occidental, Ecopetrol Extend Midland Basin Drilling JV
2025-02-03 - The updated plans between Occidental and Colombian state oil company Ecopetrol call for 34 new Midland Basin wells between April 2025 and June 2026.
Diamondback Closes TRP Acreage Swap for Midland Assets
2025-02-25 - Diamondback Energy added southern Midland Basin locations through an acreage swap with TRP Energy.
M&A Target Double Eagle Ups Midland Oil Output 114% YOY
2025-01-27 - Double Eagle IV ramped up oil and gas production to more than 120,000 boe/d in November 2024, Texas data shows. The E&P is one of the most attractive private equity-backed M&A targets left in the Permian Basin.
Minerals M&A to Heat Up in ‘25 with $4B Diamondback Sale–KeyBanc
2025-01-21 - KeyBanc analysts expect an “imminent” Diamondback Energy dropdown to Viper Energy and at least a couple of $500 million deals by public mineral and royalty companies in 2025, with Sitio Royalties a likely acquirer.
Report: Will Civitas Sell D-J Basin, Buy Permian’s Double Eagle?
2025-01-15 - Civitas Resources could potentially sell its legacy Colorado position and buy more assets in the Permian Basin— possibly Double Eagle’s much-coveted position, according to analysts and media reports.