US rig slump continues, led by Permian decline: Baker Hughes
Quantum Commodity Intelligence – North American drilling activity slumped to a fresh 18-month low, dropping for a seventh consecutive week, oilfield services firm Baker Hughes reported.
The total rig count tumbled by 10 units to 632 the week ending 25 August, 133 rigs below the same stage last year, or down 17%, while posting a sixteenth decline over the previous 17 weeks.
Oil rigs dropped eight units to 512, which was 93 fewer than at the same stage last year and the lowest since February 2022, while rigs drilling for gas fell by two to 115, 43 fewer on the year.
The number of active rigs also registered a fourth monthly decline, falling 32 units during August.
Texas resumed its decline, dropping five rigs to 307 and 64 fewer than a year ago, while the Permian Basin, spanning West Texas and New Mexico, lost seven rigs, falling to 320 and down 28 from year-ago levels.
Consolidation
A fall in drill rigs is viewed as a precursor to slower future production growth and what some see as stagnation in the shale sector, prompting talks across the sector on consolidation and mergers.
Last week, independent E&P firm Permian Resources and Earthstone Energy entered into a definitive agreement under which Permian will acquire Earthstone in an all-stock transaction valued at approximately $4.5 billion.
The deal will increase Permian Resources' position in the Permian Basin by approximately 223,000 net acres to more than 400,000 net acres, with combined production of approximately 300,000 barrels of energy equivalent per day (boepd).
In May, US energy major Chevron announced a definitive agreement with PDC Energy to acquire all of the outstanding shares of the independent producer in a $7.6 billion deal.
In April, Exxon was in talks with driller Pioneer Natural Resources, but no further updates have been announced.
Meanwhile, NYMEX WTI trading on the Chicago Mercantile Exchange settled on Friday at $81.25/b for the Oct23 contract, down 1.75% on the week.
Front-month Oct23 ICE Brent futures closed at $84.80/b, down just 0.4% over the same timeframe.
Natural gas
US natural gas was marginally lower over the week as the Sep23 Henry Hub contract on NYMEX closed at $2.54/mmBtu for a 0.5% loss, with firm domestic demand offset by soaring production levels.
The summer heatwave had lifted power prices in Texas to around 30-month highs, while the state's power supplier, ERCOT, called for conservation measures to reduce strains on the state's grid.
Tropical Storm Harold, which landed in South Texas, caused a brief disruption in gas flows to Cheniere Energy's Corpus Christi LNG plant, but not enough to significantly impact prices.
Meanwhile, data released by the Energy Information Administration revealed the US was the world's largest LNG exporter during the first six months of 2023
US LNG exports averaged 11.6 billion cubic feet per day (Bcf/d) during the period, 4% (0.5 Bcf/d) higher than the first half of last year and 9.5% (1.0 Bcf/d) higher than the 2022 annual average, according to the EIA.
Australia was the world's second-largest LNG exporter in the first half of 2023, with LNG exports averaging 10.6 Bcf/d during this period, followed by Qatar at 10.4 Bcf/d.
The increase in LNG exports from the United States was primarily the result of Freeport LNG's return to service following an extended outage, along with continued growth in global LNG demand, particularly in Europe.
