U.S. drilling permit activity climbed sharply in July, led by the Eagle Ford Shale, Powder River and Permian basins, but the overall numbers are still short from the pre-pandemic days of July 2019, according to Evercore ISI.

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The energy analyst team led by James West uses federal and state data to compile a monthly review of exploration and production (E&P) permit requests across the country. Permitting requests usually precede drilling development  by a few months.

Based on the latest tally, E&Ps last month requested 81% more permits than in June and 12% more than in July 2020.  

“The increase was driven by permit growth in the Powder River Basin,” which saw 550 more permits month/month (m/m), or a 1,505% increase, the Evercore team noted. 

The Permian permit count was 44% higher, with 314 more than in June. Eagle Ford permitting climbed by 204% m/m, or by 188 permits.

There were “minor decreases” in the Mississippian Lime, down 11% from June with 18 fewer permits. The Utica Shale’s permit tally fell by 44%, or by 11. The “other smaller plays” were off by 30% or by 54 permits.

“The summer increase, however, continues to fall short when compared to July 2019, which was 36% higher than this year’s,” West said. Permitting activity in Wyoming, however, is exploding. Texas is in recovery mode.

“Activity in Wyoming reached its highest permit count since November 2019,” up 1,502%, with 631 permit requests m/m. That could signal “a return to 2017-2019 numbers, when the state averaged 1,400 permits per month,” West said.

“Texas followed Wyoming in permit count increases,” with 523, or 81% higher than in June. The state’s permit count was the highest monthly count since January 2020.

Other states showing increases m/m included West Virginia, up by 189 or 1,112% and New Mexico, up by 72 or 33% higher. 

Permitting fell in California, however, down by 40 or 43% lower m/m. Pennsylvania’s permit numbers also fell, down by 20 or by 25%. Kentucky saw a 100% shortfall in permitting, down by 19. Kansas was down 13% m/m, with 16 fewer permits.

The energy majors led the way in the Permian during July, the Evercore analysts noted.

“The month of May experienced a decline in permitting by the majors in the Permian, falling by 84% to only nine permits issued,” the analysts said. 

June rebounded to 48, growing by 410%. July continued the trend, up 21% m/m to 59.

The permit increase in the Permian last month was “driven primarily by ExxonMobil,” up by 30 m/m, and by Royal Dutch Shell plc, which requested 21 permits.

“The pair, along with BP plc, are the only majors active in the basin,” as legacy producer Chevron Corp. requested no permits during July.

Evercore said the gains in permitting tie in with improving hiring trends reported by the U.S. Bureau of Labor Statistics. Growth in mining support jobs, which is Evercore’s proxy for the oilfield services sector, in July saw a 2% increase m/m and a 15% jump year/year (y/y). That marked the largest growth y/y since October 2018, analysts noted.

“Similarly, oil and gas extraction workers grew 1% m/m and 3% y/y this July, providing the fifth consecutive month of y/y growth after a 14-month streak of declines.”

Rising Rig Count

In related news, Enverus said the number of rigs running in the Lower 48 was up by eight as of Wednesday from a week earlier. 

“The count is up 7% on the month and up 104% on the year,” Enverus noted. “Major plays with the largest week/week increases were in Appalachia and the Permian, each gaining three rigs for respective totals of 44 and 230.”

To date in the third quarter, the Permian rig count has averaged 227, up from 219 sequentially and from 194 in 1Q2021, according to Enverus. In Appalachia, around 43 rigs on average have been in operation during 3Q2021. That compares to 44 in 2Q2021 and 41 in 1Q2021.