In a notable shift, U.S. energy firms have added oil and natural gas rigs for the first time in eight weeks, according to Baker Hughes’ latest report released on Friday. This increase signals a potential boost in future output.
Key Highlights:
Rig Count Increase:
The total oil and gas rig count rose by seven, reaching 589 in the week ending December 6, marking the highest level since mid-September. Despite this uptick, the count remains 37 rigs or 6% lower compared to the same period last year.
Breakdown of Rigs:
Oil Rigs: Increased by five to 482, the highest since mid-October.
Gas Rigs: Increased by two to 102, the highest since early November.
Trends and Challenges:
The overall rig count dropped approximately 20% in 2023 following a significant rise of 33% in 2022 and 67% in 2021. This decline is attributed to falling oil and gas prices, rising labor and equipment costs due to inflation, and a strategic focus on debt repayment and shareholder returns rather than increasing output.
Market Performance:
U.S. oil futures are down 6% so far in 2024, following an 11% decline in 2023. Conversely, U.S. gas futures have risen by 23% in 2024 after a 44% drop last year.
Spending Plans:
According to TD Cowen, a financial services firm, the 25 independent exploration and production (E&P) companies surveyed plan to maintain their spending in 2024 at levels similar to 2023. This is a significant shift from previous years, which saw spending increases of 27% in 2023, 40% in 2022, and 4% in 2021.
Production Outlook:
The U.S. crude output is projected to rise 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, according to the U.S. Energy Information Administration (EIA).
Gas Production Concerns:
Several producers have scaled back drilling activities this year due to a significant drop in monthly average spot prices at the U.S. Henry Hub benchmark, which fell to a 32-year low in March and have remained low. The EIA forecasts a decline in U.S. gas output to 103.4 billion cubic feet per day (bcfd) in 2024, down from a record 103.8 bcfd in 2023.