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U.S. Adds Four Natural Gas Rigs, but Oil Drilling Leads Gains

The U.S. natural gas patch added four rigs for the week ended Friday (Oct. 12) to reach its highest level since June, according to data from Baker Hughes, a GE Company (BHGE).

As has often been the case recently, an increase in oil drilling activity overshadowed the gas-directed gains; eight oil rigs returned to the patch to join the four gas rigs, offsetting the departure of one miscellaneous rig.

The United States added 11 rigs overall, growing its tally to 1,063. Eight horizontal units and four directional units returned to action, while one vertical rig packed up shop, according to BHGE.

All of the net drilling gains in the United States for the week were on land. Rig activity in the Gulf of Mexico, which saw production shut-ins during the week because of Hurricane Michael, held steady at 22 rigs, up from 20 running a year ago.

Canada saw 13 rigs return to the patch, including eight oil and five natural gas. But the Canadian rig count continues to lag its year-ago tally, finishing at 195 rigs as of Friday, down from 212 active rigs at this time last year. The combined North American rig count ended the week at 1,258, up from 1,140 in the year-ago period.

Among plays, the biggest mover on the week was the Permian, which added four rigs to climb to 489 active units, well above its year-ago tally of 384. According to a detailed breakout of BHGE data by NGI’s Shale Daily, the Permian’s Delaware sub-basin added three rigs for the week, while the Midland sub-basin saw two rigs return to action. Those gains offset the loss of one rig from the “Other Permian” category.

Meanwhile, the Cana Woodford saw two rigs depart on the week. The Shale Daily breakout of BHGE data shows the SCOOP (aka, the South Central Oklahoma Oil Province) adding one rig, with the STACK (Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties) dropping three units.

Also among plays, the Arkoma Woodford and Denver Julesburg-Niobrara each added one rig, while the Eagle Ford and Utica shales each dropped one, according to BHGE.

The two states underlying the Permian unsurprisingly posted strong gains for the week. Texas added eight units to grow its tally to 532, while New Mexico added three rigs to 102 (up from 69 a year ago). Louisiana added two rigs, while Colorado and Wyoming each added one. Ohio and Oklahoma each finished the week with one less rig.

While the domestic rig count increased for the week, declines could be imminent after U.S. oil and gas drilling permits slid in September, down 21% sequentially and 27% from a year ago, according to analysts with Evercore ISI.

The Evercore team led by James West compiles a monthly permit report using data from all major producing states and the Bureau of Ocean Energy Management. According to Evercore, a total of 3,469 permits were issued during September, and the decrease in the number of permits from August and a year ago “suggests a year-end pullback in the U.S. rig count is plausible,” even though high specification rigs likely will remain active.

“The data compares to the recent permit count high of 7,746 in August 2014 and the monthly onshore permit count peak of 8,441 in June 2008,” Evercore’s team said.

Weakening permit numbers from August were reported in Colorado, off 43%, Texas, which was down 26%, and in Kansas, down 34%. The losses were offset in part by sequential gains in Wyoming (21%), Utah (24%) and Montana (78%).

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