U.S. Rig Count Holds Steady for Second Week

By Scott DiSavino

(Reuters) – U.S. energy firms this week kept the number of oil and natural gas rigs unchanged for the second week in a row, according to a closely followed report by energy services firm Baker Hughes (NASDAQ:BKR) released on Friday.

The oil and gas rig count, a key indicator of future output, remained at 589 for the week ending December 20.

Baker Hughes reported that this total represents a decline of 31 rigs, or 5%, from a year ago. The breakdown is as follows:
– Oil rigs: Increased by 1 to reach 483.
– Natural gas rigs: Decreased by 1 to 102.

The oil rig count now stands at its highest level since September.

In 2023, the oil and gas rig count dropped about 20% after significant increases of 33% in 2022 and 67% in 2021. This decline was attributed to falling oil and gas prices, rising labor and equipment costs due to inflation, and a shift in company priorities towards debt repayment and shareholder returns, rather than increasing production.

Despite the latest data from Baker Hughes, U.S. oil futures remained stable, showing a year-to-date decline of about 3%, after an 11% decrease in 2023. Conversely, U.S. gas futures have increased approximately 49% in 2024, recovering from a 44% drop in 2023.

The 25 independent exploration and production (E&P) companies tracked by TD Cowen suggest that spending in 2024 is expected to remain roughly unchanged from 2023, contrasting with prior year-over-year spending increases of 27%, 40%, and 4% in the previous three years respectively.

According to the latest outlook from the U.S. Energy Information Administration (EIA), U.S. crude output is projected to increase from a record 12.9 million barrels per day (bpd) in 2023 to 13.2 million bpd in 2024, and further to 13.5 million bpd in 2025.

On the natural gas front, several producers have lowered drilling activities following a decline in average monthly spot prices at the U.S. Henry Hub benchmark in Louisiana, which reached a 32-year low in March and remained low for several months subsequently.

This reduction in drilling is expected to result in a decline in U.S. gas output for the first time since a drop in demand during the COVID-19 pandemic in 2020. The EIA projects gas output will fall to 103.2 billion cubic feet per day (bcfd) in 2024, down from a record high of 103.8 bcfd in 2023.