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Baker Hughes Confirms a Third Weekly Decline in US Oil and Gas Rigs
10/12/2023
- U.S. energy firms reduce oil and gas rigs for the third consecutive week.
- Baker Hughes reports the lowest rig count since February 2022.
- Oil futures show a modest increase, while gas futures experience a significant drop.
In a recent announcement, energy services firm Baker Hughes stated that U.S. energy companies have decreased the number of operating oil and gas rigs for the third successive week. This development marks the first such consistent reduction since early September.
As of October 6, the count for oil and gas rigs, considered a precursor to future production levels, has seen a decline by four, positioning it at 619. This is the lowest figure recorded since February of the preceding year. The overall rig count has decreased by 143 or 19% when compared to last year's statistics.
Specifically, U.S. oil rigs have declined by five, reaching 497, a figure mirroring that of February 2022. Conversely, gas rigs have shown an uptick of two, bringing the total to 118.
This year has seen U.S. oil futures rise by approximately 3%, following a 7% gain in 2022. On the other hand, U.S. gas futures have witnessed a 26% decrease after enjoying a 20% increment last year.
O&G Production Trends Amid Price Shifts
The continuous rig cut over three quarters is largely attributed to the significant price drop in mid-2022. Even though oil production has returned to levels prior to the pandemic, the growth rate has decelerated, owing to the roughly 12-month duration required for price alterations to influence output modifications.
Gas production has sustained its upward trend, largely due to heightened interest in shale oil drilling, which consequently yields substantial associated gas. This is particularly evident in prolific oilfields such as the Permian Basin situated in West Texas and eastern New Mexico.
However, the recent drop in gas prices has led to a noticeable reduction in output growth. In an effort to optimize oil output, shale companies have concentrated on the most lucrative well sites, implementing extended lateral drilling to enhance well productivity.
Exxon Mobil's Expansion Plans
Exxon Mobil, the leading U.S. oil producer, has officially announced a merger with Pioneer Natural Resources in an all-stock transaction valued at approximately $59.5 billion. The transaction emphasizes ExxonMobil's strategy to expand its presence in the Permian Basin, more than doubling its footprint. The merger brings together Pioneer's over 850,000 net acres in the Midland Basin with ExxonMobil's 570,000 net acres, creating an unparalleled inventory position in the industry. This partnership aims to boost U.S. energy security, accelerate Pioneer’s net zero ambition from 2050 to 2035, and further solidify the company's leadership in sustainable energy production.
Pioneer CEO, Scott Sheffield, highlighted the merger as a monumental step that combines the strengths of both companies, ensuring long-term success and creating tangible value for shareholders1. The collaboration is anticipated to generate significant returns by efficiently harnessing resources, reducing environmental impact, and optimizing production through advanced technologies.
The deal also signifies ExxonMobil's commitment to capital efficiency and enhancing its upstream portfolio. By 2027, it's expected that short-cycle barrels will make up more than 40% of ExxonMobil's total upstream volumes, positioning the company to swiftly adapt to market demands.
About Baker Hughes
Baker Hughes is a premier energy services company, offering advanced technologies and services to oil and gas companies globally. Their comprehensive suite of solutions aids in the exploration, production, and management of hydrocarbon resources, underscoring their commitment to shaping the future of energy.
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Occidental's Asset Cuts After CrownRock's $12 Billion Deal
Occidental Petroleum is expanding its reach in the Midland Basin and targeting deeper drilling in the Barnett area through its significant $12 billion purchase of CrownRock LP. CrownRock, a collaboration between CrownQuest Operating LLC and Lime Rock Partners, is recognized for its prime land holdings in the Permian Basin. This acquisition brings over 94,000 net acres and 1,700 undeveloped drilling spots in the Midland Basin to Occidental's portfolio.
Anticipated Growth: Endeavor Energy's Value Nearing $30 Billion
This summer, J.P. Morgan Securities highlighted Endeavor Energy Resources as the Midland Basin's standout in mergers and acquisitions, suggesting its value might approach $30 billion. Endeavor Energy Resources, a privately-owned entity in Midland focusing solely on its operations, has seen a significant uptick in production. It now boasts a production rate of 331,000 barrels of oil equivalent per day (boe/d), marking a 25% increase from the previous year.
Kinetik Holdings recently announced a series of transactions in the energy sector. They struck a deal to buy Durango Permian infrastructure for $765 million. At the same time, they're selling their 16% share in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $540 million. The total purchase cost includes $510 million in cash paid immediately and an additional $30 million that will be paid later, depending on whether they decide to expand further.
Recently, the Permian has seen significant acquisitions: Exxon Mobil purchased Pioneer Natural Resources for about $60 billion. Diamondback Energy's $26 billion deal to acquire Endeavor Energy Resources is currently on hold due to requests from the U.S. Federal Trade Commission. Occidental’s acquisition of CrownRock for $12 billion in the Midland.
EOG Resources is pushing boundaries in Ohio's Utica oil play and now drilling on the Sable pad, also located in Noble County. This site features the 3.7-mile lateral currently under construction. The company's first multi-well pads in the area Timberwolf and Xavier have each produced over 200,000 barrels of oil since their inception—Timberwolf in August and Xavier in October. A third site, the four-well White Rhino pad in Noble County, is also showing promising early results, according to Keith Trasko, EOG’s Senior Vice President of Exploration and Production, who noted the wells are performing as expected in their initial weeks.