Oil and natural gas production remains strong despite a continuing decline in the number of drilling rigs that are operating and industry spokesmen say production will probably not be affected.
Texas Independent Producers & Royalty Owners President Ed Longanecker said rig count data is still a strong indicator for production trends and activity, but the innovation and efficiencies gained by operators in recent years are enhancing the productivity of wells, which will likely result in maintaining higher levels of output despite a declining rig count.
“Texas had the highest rig count in the country in 2023 with an average of 356 active rigs,” Longanecker said from Austin. “The number of rigs in Texas decreased from a high of 428 in January to 314 in December, but the state reached record levels of production for oil and natural gas last year.
“In comparison, the average Texas rig count in 2022 was 380.”
Texas Oil & Gas Association Chief Economist Dean Foreman said American oil and natural gas supplies have grown largely due to the Permian Basin’s strong performance as the result of industry’s continued commitment toward energy leadership and innovation.
Foreman noted that the U.S. Energy Information Administration’s estimates of rig productivity for May 2024 show continued increases year-over-year across the major Texas basins including the Anadarko, 23.4 percent; Eagle Ford, 27.1 percent; Permian Basin, 23.2 percent; and Haynesville, 16.4 percent.
“Given the Permian Basin’s massive scale, a May 2024 output of 6.2 million barrels per day of crude oil and over 25 billion cubic feet per day of natural gas, even small productivity gains can be consequential,” Foreman said in a news release. “But increases in excess of 20 percent year over year across the major basins are historically strong and make the number of rigs less important than it has been in the past.”
Foreman said the oil and natural gas industry’s responsiveness has apparently matured along with the U.S. energy revolution. “This behavior has been driven by multiple factors, so it may not be accurate to extrapolate more of the same based on mergers and acquisitions,” he said. “Larger companies ultimately have a relatively greater need to replace the natural decline of their existing production and with increased contiguous land positions in Texas this could in turn support greater drilling and production for the Lone Star State.”
The Baker Hughes Corp. reported June 14 that the number of oil and natural gas rigs operating nationally, 590, was the lowest since January 2022, down from 594 the previous week and down from 695 a year ago.
“In Texas, the state with almost half of the country’s active rigs, the total count slid by two to 285, the lowest number of rigs operating in the state since January 2022,” the Reuters News Agency said.
“The oil and gas rig count dropped about 20 percent in 2023 after rising by 33 percent in 2022 and 67 percent in 2021 due to a decline in oil and gas prices and higher labor and equipment costs from soaring inflation as companies focused on paying down debt and boosting shareholder returns instead of raising output.”
Oil futures contracts are available at $77.98-$80.50 per barrel in July, $77.58-$79.97 in August, $77.07-$79.26 in September, $76.49-$78.50 in October, $75.94-$77.78 in November, $75.40-$77.12 in December, $74.92-$76.41 in January next year, $74.48-$75.95 in February and $74.06-$75.40 in March.
