Rising U.S. Oil and Gas Rig Counts: Implications for Global Energy Markets

Current Trends in U.S. Rig Counts

Current U.S. rig counts are influenced by exploration spending and price expectations, with a notable 16% year-on-year decrease in U.S. land rigs. Natural gas producers have reduced rigs due to lower prices, while oil-focused basins have seen an increase in active rigs.

"Rig count trends are driven by the exploration and development spending by oil and natural gas companies, which in turn is influenced by current and future price expectations for oil and natural gas." --- (BKR, sec filing, 2024/Q2)

"The historical average rig counts based on the weekly Baker Hughes rig count data were as follows: Three Months Ended March 31 Year Ended December 31 2024 2023 2023 U.S. Land 602 744 669 U.S. Offshore 21 16 18 Canada 208 221 177 North America 831 981 864 International 965 915 948 Worldwide total 1,796 1,896 1,812 HAL Q1 2024 FORM 10-Q | 17 Part I. Item 2 | Business Environment and Results of Operations Business outlook" --- (HAL, sec filing, 2024/Q1)

"North America revenue decreased 6% year-on-year, primarily due to lower rig count in U.S. land and the effect of lower gas pricing which impacted our APS project in Canada." --- (SLB, earning call, 2024/Q1)

"Within North America, the decrease was primarily driven by the U.S. rig count, which was down 16% when compared to the same period last year, partially offset by an increase in the Canada rig count, which was up 16% when compared to the same period last year." --- (BKR, sec filing, 2024/Q2)

"In the U.S., in the first quarter of 2024 natural gas producers responded to lower prices by reducing rig count in natural gas basins even as oil focused basins saw an increase in active rigs." --- (HAL, sec filing, 2024/Q1)

U.S. Production Increases

U.S. oil production has surged due to increased onshore activity, the return of Gulf of Mexico production, and significant growth in the Permian Basin. This rise, driven by acquisitions and organic growth, has pushed total U.S. output over 13 million barrels per day, contributing to lower gasoline prices.

"The production increase is mainly due to U.S. onshore activity levels, the completion of annual plant maintenance at Dolphin and the return of production in mid-April from the Gulf of Mexico outage." --- (OXY, earning call, 2024/Q1)

"The growth of total U.S. oil production to over 13 million barrels of oil per day has contributed to reduced gasoline prices for U.S. consumers." --- (PXD, press release, 2024/05/02)

"Production was up over 12% from last year, including an increase of 35% in the United States largely due to the PDC Energy acquisition and organic growth in the Permian Basin." --- (CVX, earning call, 2024/Q1)

"To meet society's needs for energy and products, we increased production by a combined 18% in Guyana and the Permian. These are among the most advantaged assets in our portfolio and among the lowest cost supply in industry." --- (XOM, event transcript, 2024/05/29)

"The increase was due to an increase of 29.7 MBbld, or 6%, in wellhead crude oil and condensate production ($245 million) and a higher composite average price ($53 million)." --- (EOG, sec filing, 2024/Q1)

Global Oil Price Fluctuations

Global oil price fluctuations are influenced by a myriad of factors including global economic conditions, OPEC+ actions, and geopolitical conflicts. Increased demand and supply disruptions have driven refining margins to decade highs, while Middle Eastern conflicts have pushed crude prices above $80 per barrel.

"Crude oil and natural gas prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by OPEC+ countries, actions of regulators, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company’s control, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty." --- (CVX, sec filing, 2024/Q1)

"Refining margins in the quarter rose to the top of the 10-year range, as demand grew while turnarounds and global disruptions weighed on supply." --- (XOM, sec filing, 2024/Q1)

"Hedge funds appear to be particularly keen on energy stocks right now as a resilient global economy and conflict in the Middle East push crude oil prices above $80 U.S. per barrel." --- (CVX, press release, 2024/07/08)

"Upstream First Quarter Earnings Factor Analysis (millions of dollars) Price – Price impacts decreased earnings by $820 million, driven by a 32% decrease in natural gas realizations, partially offset by a 4% increase in liquids realizations." --- (XOM, sec filing, 2024/Q1)

"Three Months Ended March 31 2024 2023 (Millions of dollars) Purchased crude oil and products $ 27,741 $ 29,407 Purchased crude oil and products decreased for the first quarter primarily due to lower natural gas prices and lower refinery crude unit inputs." --- (CVX, sec filing, 2024/Q1)

Renewable Energy Investment Trends

Investments in renewable energy are surging, driven by financial gains, technological advancements, and policy support. Companies like NextEra Energy and First Solar highlight significant growth in their renewables portfolios, while Tesla and Enphase Energy emphasize the strategic importance and economic benefits of sustainable energy investments.

"Contributions from new investments increased $0.12 per share year-over-year, primarily driven by continued growth in our renewables portfolio. Our existing clean energy portfolio increased $0.06 per share, primarily reflecting an increase in wind resources during the quarter." --- (NEE, earning call, 2024/Q2)

"Market Overview Solar energy is one of the fastest growing forms of renewable energy with numerous economic and environmental benefits that make it an attractive complement to and/or substitute for traditional forms of energy generation." --- (FSLR, sec filing, 2024/Q1)

"No other shareholder base understands its company like you do, nor is as committed to Tesla's mission to accelerate the world's transition to sustainable energy like you are. It is also a shareholder base that understands that in order to accelerate the world's transition to sustainable energy and a sustainable energy economy, Tesla needs to develop the most revolutionary technologies, not only in autos, but in energy and artificial intelligence as well." --- (TSLA, event transcript, 2024/06/13)

"Today, we're continuing to build on the momentum created by the IRA and reach more people with clean, #renewableenergy, drive forward our domestic clean energy goals, and create high-quality American jobs." --- (ENPH, Twitter, 2024/07/11)

"Renewables are energy independence, it's electricity generated from the sun and the wind, it's not subject to fuel price volatility. Low cost renewables are also bringing power bills down which attract new investment from data centers, semiconductor chip manufacturers and other sectors that are looking to invest in the U.S., and low power bills can really dictate which states they select to make those investments in." --- (NEE, earning call, 2024/Q2)

Global Supply and Demand Dynamics

Energy demand models are forward-looking, influenced by policies supporting net zero emissions, and record demand trends. Government policies significantly impact market economics, particularly in renewable fuels and hydrogen. Long-term demand for natural gas remains strong, with companies positioning themselves for low-cost supply advantages.

"Energy demand models are forward-looking by nature and aim to replicate system dynamics of the global energy system, requiring simplifications." --- (XOM, sec filing, 2024/Q1)

"These policies and programs, some of which support the global net zero emissions ambitions of the Paris Agreement, can change the amount of energy consumed, the rate of energy-demand growth, the energy mix, and the relative economics of one fuel versus another." --- (CVX, sec filing, 2024/Q1)

"We saw record demand in 2023 and expect another record this year. At the same time, we're constantly monitoring trends and signpost in the global markets and we're prepared to adjust and evolve just as we have for the past 140 years. As I said earlier, our core capabilities are critical to meeting society's needs at any point in energy transition, no matter how fast it proceeds or what form it takes." --- (XOM, event transcript, 2024/05/29)

"And so we're pleased with both of these. There are markets, maybe to your point about economics that are in some ways heavily influenced by government policy, be it the renewable fuel standard and the Low Carbon Fuel Standard, which affect renewable fuels or some of the things in the investment or the inflation reduction act that affect hydrogen." --- (CVX, earning call, 2024/Q1)

"We also see long-term demand for natural gas, and so I think as we look at both of those, both the liquids and the gas side of the equation, we see a long-term future there and an opportunity for this company to participate if we have advantaged projects that position us on a low cost of supply, and so that's how we think about that." --- (XOM, earning call, 2024/Q1)

Technological Advancements in Drilling

Technological advancements in drilling, such as horizontal drilling and digitalization, have significantly enhanced productivity, efficiency, and market access. Companies like SLB and HAL highlight these improvements as critical to field development and achieving better returns, while CVX emphasizes the importance of reliability in operations.

"This cooperation resulted in technological milestones that enabled drilling horizontally for long intervals in the reservoir and acquiring a large volume of data critical to the field development while supporting a significant oil discovery." --- (SLB, press release, 2024/04/19)

"We've got a good position in there, but I think with even more opportunity to grow, particularly with drilling technology that continues to advance." --- (HAL, earning call, 2024/Q1)

"And it's important that we focus not only on productivity, efficiency and reliability and drilling and completions, but also in all aspects of operations." --- (CVX, earning call, 2024/Q1)

"The initiative represents a significant advancement in digitalizing the drilling operations of Pakistan's energy sector to enhance operational efficiency, reduce costs, and promote sustainable oil and gas exploration in the country. Digital Enablement" --- (SLB, press release, 2024/04/19)

"But I would not overlook the importance of the improvement in drilling technology, particularly just because it's more access to a larger market and at a much better rate of return for us given the improvement over legacy technology." --- (HAL, earning call, 2024/Q1)

Environmental and Regulatory Impacts

Legislative and regulatory initiatives addressing environmental concerns, such as those targeting hydraulic fracturing, methane emissions, and LNG exports, create a tough regulatory climate. These factors, along with the need for regulatory permits, significantly influence oil and gas rig counts, impacting project plans and production rates.

"• Legislative and regulatory initiatives addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring, water disposal or LNG exports." --- (COP, sec filing, 2024/Q1)

"But it's a tough regulatory climate. And you're well positioned as one of the players that still has multiple assets in California." --- (CVX, earning call, 2024/Q1)

"Actual future results, including project plans, schedules, initial capacities, production rates, and resource recoveries could differ materially due to: changes in market conditions affecting the oil and gas industry or long-term oil and gas price levels; political or regulatory developments including obtaining necessary regulatory permits; reservoir performance; the outcome of future exploration efforts; timely completion of development and construction projects; technical or operating factors; and other factors cited under the caption "Factors Affecting Future Results" on the Investors page of our website at exxonmobil.com and under Item 1A." --- (XOM, press release, 2024/04/12)

"This approach will help ensure ConocoPhillips remains on its core competencies and maintains its position as a leading energy producer, while also acknowledging the broader environmental and economic impacts of its operations." --- (COP, event transcript, 2024/05/14)

"The company’s oil and gas business may increase or decrease depending upon regulatory or market forces, among other factors." --- (CVX, sec filing, 2024/Q1)