U.S. drilling permit activity slumped across the major Lower 48 basins in August, up sharply from a year ago but down from 2019 levels, according to Evercore ISI.

drilling permit activity

The Evercore team led by analyst James West compiles a monthly report about drilling activity using state and federal data. Permits are usually requested by producers three to six months before an onshore project is begun.

“After an 81% monthly jump in July, the U.S. drilling permit count slumped 17% in August,” the Evercore analysts noted.

The Permian Basin saw permit activity decline by 28% month/month (m/m), down by 288 permits. Eagle Ford Shale permitting was off 38% from July, down by 107. In the Powder River Basin, permitting fell by 17% m/m, or by 101 permits. Marcellus Shale permitting declined by 30% from July, with 80 fewer permits requested.

The declines in requests for permits in the biggest oil and gas production areas of the Lower 48 were offset slightly by moderate growth in some of the smaller basins, with permitting overall up 82% m/m, or by 80 permits. The Mississippian Lime, for example, had a 14% increase in permitting from July, with 20 more permit requests.

Compared with a year ago when the energy sector was pounded by slumping oil and gas demand, permitting overall in August climbed by 119% year/year. However, compared to the pre-pandemic days of August 2019, permitting last month was off by 51% and down 60% on a year-to-date (YTD) basis, the Evercore analysts noted.

“For context, Permian August permits were 87% above those from August 2020, 13% below the same period in 2019, and are 4% lower on a YTD basis when compared to 2019. The same trend holds true for the Eagle Ford, which reported permits 125% higher than 2020 and 25% below versus August 2019, while they are currently 30% lower relative to 2019 on a YTD basis.”

The state permitting trends are signaling a turn, with Texas stumbling and California appearing to be stepping up, according to the Evercore data.

“U.S. states with the largest absolute permit counts experienced some of the sharpest declines in August,” the analysts said. 

Texas fell by 31%, off 364 permits m/m, while Wyoming was down 16% (minus 108), and New Mexico sank 43% (minus 125). 

“Surprisingly, California experienced an offsetting surge in permits last month of 258% (up 134 m/m), its highest count since April, which was when Gov. Gavin Newsom set a 2024 ban for new drilling permits,” the analysts said. 

Meanwhile, oil and gas industry hiring continues to trend higher, Evercore noted. 

“The U.S. Bureau of Labor Statistics reported increases in both mining support activities (our proxy for oilfield services) and oil and gas extraction employees, as both experienced monthly increases of 1% each in August,” said the analysts. “The number of mining support employees has risen by 16% YTD versus 2020, while oil and gas extraction hiring is up by 5%. 

“Compared to 2019 levels however, employees working in both areas are still lower by 18% and 3% on a YTD basis.”