Baker Hughes, an energy services firm, reported that U.S. energy companies reduced the number of oil and natural gas rigs in operation for the third consecutive week, marking the first such decline since October. The oil and gas rig count, serving as an early indicator of future output, decreased by one to 620 in the week ending April 5, reaching its lowest level since early February.
According to Baker Hughes, this reduction brings the total rig count down by 131, or 17%, compared to the same period last year. Specifically, oil rigs increased by two to 508, while gas rigs decreased by two to 110, hitting their lowest count since January 2022.
The decline in natural gas prices earlier this year led to a reduction in the number of gas rigs operating in the Haynesville shale gas field across Louisiana, Texas, and Arkansas. This week, the basin lost two rigs, resulting in only 34 active rigs – the lowest count since August 2020.
In 2023, the oil and gas rig count dropped by approximately 20% following a 33% increase in 2022 and a 67% surge in 2021. Factors contributing to this decline included falling oil and gas prices, escalating labor and equipment expenses due to inflation, and a strategic shift by companies towards debt reduction and shareholder returns over production expansion.
While U.S. oil futures have risen by about 22% in 2024 after a decline of 11% in 2023, U.S. gas futures have dropped by approximately 28% this year following a 44% plunge in 2023. The uptick in oil prices is expected to incentivize drillers to enhance U.S. crude output from a record 12.9 million barrels per day (bpd) in 2023 to 13.2 million bpd in 2024 and further to 13.6 million bpd in 2025, as per the latest U.S. Energy Information Administration (EIA) projections.
Conversely, the decrease in gas prices is anticipated to lead to a reduction in U.S. gas output to 103.4 billion cubic feet per day (bcfd) in 2024 from a record high of 103.8 bcfd in 2023, as some producers curtail spending and scale back drilling activities.