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What's Behind the Rise in U.S. Drilling Rigs?
07/10/2024![What-s-Behind-the-Rise-in-U-S-Drilling-Rigs](https://images2.rextag.com/public/blog/293_Blog_ What's Behind the Rise in U.S. Drilling Rigs_.jpg)
The total number of drilling rigs actively exploring and producing oil and natural gas in the United States increased to 585 for the week ending July 5, up from 581 the previous week. Despite this recent uptick, the current count still falls short of last year's 680, indicating a slowdown in drilling activities. Analysts suggest that this reduction may reflect greater efficiency among shale producers, who now require fewer rigs. Nonetheless, concerns remain about whether some producers have enough viable drilling land.
Breaking down the numbers, onshore drilling accounted for 562 rigs, slightly up from 560 the week before. Offshore drilling also saw an increase, with 23 rigs operating compared to 21 in the previous week.
Focusing on oil rigs, the count remained steady at 479, unchanged from the previous week, but still below last year's count of 540 and significantly lower than the peak of 1,609 seen in October 2014.
For natural gas, the rig count rose to 101, up from 97 the previous week, yet it still trails the 135 count from the same time last year. This current figure represents a dramatic 94% decrease from the all-time high of 1,606 rigs recorded in 2008.
Examining rig types, vertical drilling rigs held steady at 18 units. The count for horizontal and directional rigs, which includes advanced drilling technologies capable of penetrating dense shale formations, increased slightly from 563 to 567.
In the Permian Basin, the most active region in the U.S., the weekly oil and gas rig count remained steady at 305, matching the previous week but down from 342 the previous year.
Outlook for U.S. Oil and Gas
With the West Texas Intermediate crude trading above $80 per barrel, conditions are currently very favorable for exploration and production operations. However, despite the attractive pricing environment, there has been a noticeable slowdown in drilling activities. This trend may persist as companies in the upstream sector are now focusing more on delivering returns to shareholders rather than increasing production.
In this context, investors looking for medium to long-term opportunities might consider energy stocks like Diamondback Energy, Inc. and Matador Resources Company.
Diamondback Energy, a top Permian Basin operator, has been making significant improvements in well productivity, especially in the Midland Basin. Holding a Zacks Rank #3 (Hold), the company is expected to see continued growth in production volumes. Additionally, the upcoming merger with Endeavor, set to finalize in the fourth quarter of this year, will substantially expand its Permian holdings to about 838,000 net acres. This expansion promises an extensive inventory of prime drilling sites with a break-even oil price below $40 per barrel.
Matador Resources has also been active, entering into a $1.91 billion deal to increase its presence in the Delaware Basin. Slated to close in the late third quarter of 2024, this acquisition will bring Matador's holdings in the region to over 190,000 net acres. As a result, the company anticipates its production will surpass 180,000 barrels of oil equivalent per day, setting the stage for significant growth and enhanced operational scale.
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Diamondback's Viper Energy Acquires $1 Billion in Royalty Interests in the Permian Basin
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/186Blog_Viper Energy Secures $1 Billion in Permian.png)
Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.
TOP 2022 vs 2023 Permian Producers Overview by Rextag
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/R242_Blog_Permian Producers Overview by Rextag.png)
The Permian Basin, America's prime oil region, faced significant challenges during the COVID-19 pandemic. The industry saw a drastic reduction in rigs and fracking crews and had to close some operations as oil prices plummeted, leading to widespread restructuring. Now, the Permian is making a strong comeback. Over the last three years, exploration and production companies (E&Ps) have increased their drilling activities. They're focusing on spending wisely and maximizing returns to their investors. The Permian's role is crucial. It was projected to contribute over 5.98 million barrels of oil per day in December, making up about 62% of the total oil production in the Lower 48 states, as per the EIA.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/308_Blog_New ERA U.S. Allocates 7.3 Billion for Rural Clean Energy Initiatives.jpg)
The United States government has announced a significant investment of $7.3 billion from the 2022 Inflation Reduction Act (IRA) to support clean energy initiatives led by rural electric cooperatives. These projects aim to reduce energy costs, enhance reliability, and promote sustainability for rural communities, where energy costs tend to be higher than in urban areas. This investment marks a substantial effort toward decarbonizing rural America while supporting job creation and infrastructure improvements.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/306_Blog_Decline in US Oil and Gas Rigs Signals Continued Supply and Price Stability.jpg)
The U.S. oil and natural gas rig count experienced a slight decline, falling by four to a total of 633 rigs for the week ending August 21. Despite this modest drop, industry analysts have noted a surprising resilience in both oil supply and natural gas prices as the year progresses, suggesting that the market may be more robust than previously anticipated.
Investors remain strongly bearish on petroleum prices, even as confidence grows that the U.S. Federal Reserve will cut interest rates to boost consumer and business spending. Last week, fund managers returned to selling oil futures and options, as the brief rally from the previous week quickly lost steam and negative sentiment took hold once again. Hedge funds and other money managers offloaded 48 million barrels across the six major futures and options contracts in the week ending August 20. This marks the sixth time in seven weeks that funds have been sellers, reducing their positions by a staggering 346 million barrels since early July, based on data from exchanges and regulators.