January 27, 2025
While the U.S. oil and gas industry saw a continued decline in rig activity last week, Oklahoma defied the trend with a slight increase in its rig count. According to the latest Baker Hughes report, Oklahoma gained one active rig, bringing its total to 44—two more than this time last year. Meanwhile, the national rig count fell by four to 576, marking the lowest level since December 2021. This article delves into the latest rig activity trends and their implications for the energy sector.
Oklahoma: A Bright Spot in a Challenging Market
Oklahoma’s increase in rig activity highlights its relative stability in an otherwise challenging environment for oil and gas exploration. The state’s rig count now stands at 44, a year-over-year increase of two. This localized growth contrasts with the national trend of declining rig counts, suggesting that Oklahoma’s operators may be better positioned to navigate current market conditions.
National Rig Count: A Continued Decline
Across the U.S., the rig count dropped by four to 576 active rigs, reflecting ongoing challenges in the industry. Here’s how the numbers break down:
- Oil rigs: Down six to 472, the lowest level since December 2021.
- Gas rigs: Up one to 99, indicating a slight uptick in natural gas exploration.
- Miscellaneous rigs: Increased by one to five.
The current rig count is 45 fewer than this time last year, representing a 7% decline. This drop aligns with broader industry trends over the past two years, driven by lower oil and gas prices and a shift in corporate priorities.
State-by-State Highlights
Several states mirrored the national decline in rig activity, while others remained stable:
- Texas: Saw the largest drop, losing four rigs and bringing its total to 277.
- New Mexico: Fell by one rig to 102.
- North Dakota: Unchanged at 32 rigs.
- Permian Basin: The region’s rig count dropped by six to 298, down from 310 a year ago.
- Other States: Colorado (9 rigs), Kansas (17 rigs), Louisiana (29 rigs), and Wyoming (19 rigs) all reported no changes.
Historical Context
The U.S. rig count provides an early indicator of future production and industry health. Historical data underscores the magnitude of the current decline:
- Peak Rig Count: 4,530 in 1981.
- Pandemic Low: 244 in August 2020.
- Recent Trends: The rig count fell by 5% in 2024 and 20% in 2023 as energy firms focused on paying down debt and increasing shareholder returns rather than expanding production.
Key Drivers Behind the Decline
The decline in rig activity can be attributed to several factors:
- Lower Oil and Gas Prices: Reduced profitability has led companies to scale back exploration and drilling.
- Corporate Strategy Shifts: Many energy firms are prioritizing financial stability, focusing on debt reduction and shareholder returns instead of aggressive expansion.
- Energy Transition: The shift toward renewable energy and regulatory pressures on fossil fuels may also influence long-term investment decisions.
Looking Ahead
While the national rig count continues to decline, Oklahoma’s resilience provides a glimmer of hope for the industry. As the market adapts to fluctuating prices and evolving corporate strategies, regional variations in rig activity will remain a key area to watch. For states like Oklahoma, steady or growing rig counts could indicate stronger fundamentals or localized advantages, such as favorable geology or infrastructure.
At the same time, the broader industry faces significant headwinds. With the U.S. rig count at its lowest point since late 2021, energy firms must navigate a complex landscape of market dynamics, regulatory challenges, and the ongoing energy transition.
Conclusion
Oklahoma’s modest rig count increase stands out amid a national decline, highlighting the nuanced dynamics of the oil and gas sector. While the broader industry faces challenges, localized growth in states like Oklahoma underscores the importance of regional factors in shaping the future of energy production. As 2025 unfolds, all eyes will be on how energy firms balance financial priorities with operational needs to adapt to this evolving landscape.
