As we approach the end of 2024, the U.S. oil and gas industry remains a focal point for energy analysts and market stakeholders. According to Baker Hughes’ latest report, the total rig count across the country has held steady at 589 for the second consecutive week, highlighting the cautious yet resilient nature of the sector. Here’s a deeper dive into the latest developments.
National Rig Activity Snapshot
The current rig count reflects a mixed trend across various resource types:
- Oil Rigs: Increased by 1 to 483 rigs, marking the highest count since September.
- Gas Rigs: Decreased by 1 to 102 rigs.
- Miscellaneous Rigs: Stable at 4 rigs.
When compared to the same period last year, the total rig count is down by 31 rigs, representing a 5% decline. This includes reductions in both oil (-15 rigs) and gas (-18 rigs) activities, although miscellaneous rigs have increased by 2 over the year. Offshore rig activity remains steady at 14 rigs but is 5 fewer than one year earlier.
State-by-State Breakdown
- Oklahoma: Unchanged at 43 rigs, maintaining steady production.
- Texas: Added 1 rig, bringing its total to a robust 285 rigs.
- New Mexico: Declined by 1 rig to 103 rigs.
- North Dakota: Held steady at 35 rigs.
- Louisiana: Unchanged at 31 rigs.
- Kansas: Experienced a sharp decline, dropping 9 rigs from 33 to 24.
- Ohio, Pennsylvania, Utah, West Virginia, and Wyoming: All remained unchanged, with stable counts of 9, 15, 12, 10, and 18 rigs, respectively.
Market Trends and Influences
Several factors are shaping the current rig activity and broader industry dynamics:
- Oil Prices: U.S. crude oil futures remain down approximately 3% year-to-date, reflecting a stable but cautious market environment.
- Natural Gas Prices: A significant recovery in 2024, with futures up nearly 49%, after a sharp decline in 2023.
Despite these fluctuations, rig activity remains relatively subdued as companies prioritize financial discipline over aggressive expansion.
Production Outlook
The U.S. Energy Information Administration (EIA) projects sustained growth in crude oil production:
- 2023: 12.9 million barrels per day (bpd).
- 2024: Expected to reach 13.2 million bpd.
- 2025: Forecasted at 13.5 million bpd.
In contrast, natural gas production is set to decline slightly for the first time since the COVID-19 pandemic due to reduced drilling activity earlier in the year. The EIA estimates output will dip to 103.2 billion cubic feet per day (bcfd) in 2024, down from a record 103.8 bcfd in 2023.
Capital Spending Trends
Independent exploration and production (E&P) companies tracked by TD Cowen plan to keep their 2024 spending flat compared to 2023 levels. This marks a significant departure from the sharp spending increases of recent years:
- 2023: 27% increase.
- 2022: 40% increase.
- 2021: 4% increase.
This restraint reflects broader industry priorities, including debt reduction, cost management, and shareholder returns.
Key Challenges
The decline in rig activity over the past year can be attributed to several factors:
- Economic Pressures: Lower oil and gas prices combined with inflation-driven increases in labor and equipment costs.
- Market Strategy: A shift towards financial discipline, focusing on maximizing returns rather than ramping up production.
- Natural Gas Pricing: Historically low spot prices at the Henry Hub benchmark earlier in the year discouraged drilling activity.
Conclusion
The U.S. oil and gas industry’s stability amid these challenges reflects a strategic shift towards controlled growth and financial sustainability. While production remains robust, the emphasis on capital discipline and market adaptability highlights a more mature and cautious approach.
As 2024 concludes, all eyes will be on the interplay between global energy demand, domestic production strategies, and evolving market conditions. For now, the industry’s focus on balancing output with economic realities ensures a steady course forward.
