This week, U.S. energy companies reduced the operational oil and gas rigs for the third consecutive week, a trend not seen since early September, as noted in the latest report from energy services company Baker Hughes (BKR.O).
As of October 6, the rig count, which serves as a precursor for future production, dropped by four, reaching its lowest at 619 since February 2022. This marks a 19% decrease, or 143 rigs, compared to the same period the previous year, according to Baker Hughes.
This week, U.S. oil rigs decreased by five, reaching a count of 497, the lowest since February 2022. In contrast, gas rigs experienced a rise, increasing by two to stand at 118.
For the year, U.S. oil futures have seen an approximate 3% increase, following a 7% gain in 2022. On the other hand, U.S. gas futures have seen a significant drop of around 26% this year, even after a 20% ascent the previous year.
In the Permian region, spanning West Texas and eastern New Mexico — the country’s largest shale oil basin — drillers reduced the rig count by three this week. This puts the total oil and gas rig count at 309, a number not seen since February 2022, as reported by Baker Hughes.
Drillers have reduced active rigs consistently over the last three quarters, a reaction to the significant decline in prices from mid-2022. Although oil production has returned to levels seen before the pandemic, its growth rate has decelerated. Typically, it takes around a year for shifts in prices to translate into altered production levels.
Similarly, gas production has witnessed growth, a belated reaction to the high prices in 2022. This growth is primarily attributed to the heightened interest in drilling oil in shale regions, like the Permian, which also yield substantial amounts of associated gas.
The dip in gas prices has been notably sharp, leading to a more evident deceleration in production growth.
Shale companies have strategized to maximize oil output by focusing the limited rigs on the most prospective drilling sites and drilling longer lateral sections, enhancing the productivity of each well.
Leading U.S. oil producer, Exxon Mobil (XOM.N), is looking to enlarge its presence in the Permian. Sources from Thursday mentioned that the company is in advanced discussions to purchase Pioneer Natural Resources (PXD.N), the basin’s third-largest producer.
