February 3, 2025
U.S. energy firms added oil and natural gas rigs for the first time in eight weeks, signaling a potential shift in drilling activity, according to the latest Baker Hughes report. The total rig count increased by six to 582 for the week ending January 31, with oil rigs seeing their largest weekly jump since February 2023. However, despite this short-term gain, the broader trend remains negative, with rig counts still down 37 compared to the same period last year.

This Baker Hughes rig report provides a mix of short-term optimism with a longer-term downtrend in drilling activity. Here are a few key takeaways and implications:
- First Rig Count Increase in Eight Weeks
- The U.S. rig count rose by six to 582, breaking a nearly two-month decline.
- Oil rigs saw the largest weekly increase (+7) since February 2023, reaching 479.
- Gas rigs fell by one to 98, showing continued weakness in natural gas drilling.
- Regional Activity Highlights
- New Mexico (+4 rigs) is showing strong activity, likely driven by Permian Basin operators.
- Oklahoma (+1) and North Dakota (+1) also saw small gains.
- Texas remains the most active with 277 rigs, unchanged from the previous week.
- The Gulf of Mexico rig count dropped to 11, its lowest since March 2022.
- Haynesville Shale hit its lowest rig count (28) since January 2017, signaling weak gas drilling demand.
- Long-Term Trend Still Negative
- The total rig count is still down 37 rigs year-over-year (-6%).
- January saw the most rigs lost in a month (-7) since June 2024.
- The rig count has dropped 5% in 2024 and 20% in 2023, showing a continued slowdown in drilling investment.
- Oil & Gas Production Trends
- Crude oil production fell by 122,000 bpd in November, marking a slight retreat from record highs.
- Lower 48 natural gas production rose slightly (0.2%) to 115.8 bcfd, but still below the February 2024 record of 117.8 bcfd.
- Oilfield Services Under Pressure
- U.S. oilfield services firms are seeing weaker pricing and revenue as producers focus on efficiency and capital discipline.
- Despite that, Baker Hughes beat Q4 earnings expectations, thanks to strong demand for natural gas equipment and services.
Implications for the Industry:
- The Permian Basin remains a hotspot, given New Mexico’s strong rig gains.
- Natural gas drilling is struggling, with Haynesville and total gas rigs declining.
- Gulf of Mexico activity is weakening, with the lowest offshore rig count in nearly three years.
- Oilfield service pricing pressures suggest operators are negotiating harder and limiting spending.
- Despite the rig decline, U.S. crude and gas production remains resilient, showing the impact of efficiency gains.