Starr Spencer, S&P Global l January 14, 2021

Houston — The total US oil and gas rig count leaped by 18 to 424 in the week ending Jan. 13, rig data provider Enverus said, with the Permian seeing its largest weekly gain since the pandemic began to affect markets last March.

The Permian Basin of West Texas and New Mexico gained 14 rigs on the week for a total 190, the most added in the basin since a gain of 13 during the last week of November 2020.

The increase coincided with oil breaking the $50/b price barrier during the week—a level not seen since February 2020—and staying there. NYMEX February WTI settled Jan. 14 up 66 cents on the day at $53.57/b.

Higher oil prices may cause upstream operators to open their pockets a bit while still maintaining the much-vaunted capital discipline they have pledged over the last couple of years, S&P Global Platts Analytics analyst Andrew Cooper said.

"With WTI prices breaking $50/b and Henry Hub hovering around the $2.70/MMBtu mark, operators may start bringing back drilling and completions activity," Cooper said.

Besides the jump in total rig counts, horizontal wells are up a "massive" 22 week on week to 355, as oil-focused plays have come into the spotlight, he said.

Since bottoming at 279 oil and gas rigs in early July, the US rig count has now rebounded 52%.

Midland Basin shows most increase

In the Permian, the week's spotlight was on its Midland sub-basin, eastern plays which are more oil-focused and accounted for the bulk of this week's increase (13 rigs). Regional well breakevens in that area are currently in the high-$30s/b to low-$40s/b, Cooper said.

"While mid-$50/b WTI is definitely encouraging for US shale, we still will need to see OPEC-controlled production volumes to hold prices in this range and for demand expectations post-vaccine to surprise for oil prices to stay in this golden range for US operators," he said.

The rise in oil prices came on the heels of Saudi Arabia's surprise announcement earlier this month of an extra 1 million b/d production cut in February and March that should help bring down oil inventories that have swelled during the pandemic.

In other US oil plays, the Eagle Ford Shale in South Texas added two rigs week on week for a total 33, while the Bakken Shale mostly in North Dakota added one rig for a total 13.

Among gas basins, the US Northeast, specifically the Marcellus Shale play in Pennsylvania and West Virginia, have showed rigs ticking up and production growing again in the last few weeks, Cooper said.

Two rigs were added in the Marcellus on the week for a total 34, while the Haynesville Shale, a largely dry gas play in East Texas and Northwest Louisiana, also gained two rigs to 49.

Both oil and gas prices posted gains on the week, according to S&P Global Platts. WTI crude averaged $52.29/b, up $3.11; WTI Midland averaged $53.57/b, up $3.21 and Bakken Composite averaged $49.32/b, up $3.15.

For gas, Henry Hub averaged $2.73/MMBtu, and Dominion South averaged $2.37/MMBtu, up 14 cents each.

With higher oil prices this year, a potential uptick in capital budgets in the single-digit percentages and a need to drill to meet maintain flat or slightly higher 2021 production targets, the rig count is expected to rise further. Platts Analytics sees a total 630 oil and gas rigs by year-end 2021.