Executive Summary: Rigs: The total US rig count decreased by 5 during the week of February 16 to 543. Infrastructure: Production from the Denver-Julesburg Basin exited 2024 at ~500 Mb/d, consistent with 2024 volumes if not up slightly. Storage: East Daley expects a .53 MMbbl injection into commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending February 28.
Rigs:
The total US rig count decreased by 5 during the week of February 16 to 543. Liquids-driven basins decreased by 6 W-o-W to 457.
- Permian (-6):
- Midland (-4): Exxon, Diamondback Energy, Chevron, Civitas Resources
- Delaware (-2): Mewbourne Oil, Devon Energy
- Bakken (-1): Continental Resources
- DJ (-1): Chevron
- Anadarko (+1): Citation Oil & Gas
Infrastructure:
Production from the Denver-Julesburg Basin exited 2024 at ~500 Mb/d, consistent with 2024 volumes if not up slightly. However, East Daley believes the DJ will never again reach the peak production of ~580 Mb/d hit in 2019. We anticipate a modest decline through 2025 and 2026 as gas-to-oil ratios (GOR) change in new wells and the basin becomes gassier.
Drilling efficiency gains since 2019 have been dramatic in the DJ, with oil initial production (IP) rates per well increasing ~60% from 280 b/d to 450 b/d, drill times cut in half from 6 to 3 days, and up to four-mile drilling laterals. However, these gains won’t be enough to set the DJ on a growth trajectory when considering the change in GORs in future wells.
GORs averaged ~4.6 Mcf/bbl from wells started in 2019, with gas IP rates then at 663 Mcf/d. Today the basin GOR average is up to ~6.95 Mcf/bbl. Gas IP rates have grown 100% since 2019 to 1,312 Mcf/d in new wells.
Today’s rig count of ~9 in the DJ is also a far cry from the 33 rigs used in 2019, when aggressive drilling campaigns were the norm. Less drilling and the shift toward cash flow discipline among public companies signals a more cautious and maintenance-oriented approach to production.
East Daley believes the DJ Basin’s glory days as an oil play are behind it as the overall composition of the play changes, with gas production rising and oil production declining. However, 2025 may be the start of another shift in the DJ as the major producers reposition their assets.
Occidental Petroleum (OXY) and Civitas Resources (CIVI) are two of the basin’s largest producers, accounting for ~40% of basin volume, and both are considering sales to exit the DJ. Prairie Operating’s (PROP) recent acquisition of Bayswater Exploration & Production could be foreshadowing of the basin returning to independent, growth-minded producers.
Storage:
East Daley expects a .53 MMbbl injection into commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending February 28. We expect total US stocks, including the SPR, will close at 826 MMbbl.
The US natural gas pipeline sample, a proxy for change in oil production, increased 1.08% W-o-W across all liquids-focused basins. Samples increased 5.78% in the Williston Basin, 4.73% in the Gulf Coast and decreased 1.98% in the Permian Basin. The Rockies and the Gulf of Mexico have a high correlation between gas volumes and crude oil volumes, whereas the Permian and Eagle Ford basins correlation is less than 45%.
We expect US crude production to be 13.5 MMb/d. According to US bill of lading data, US crude imports stayed steady 6.5 MMb/d. More than 60% of the supply originated from Canadian pipelines and vessels into the US, with the remainder largely coming from vessels carrying crude from Mexico, Brazil and Venezuela.
As of February 28, there was ~650 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude input into refineries to increase, coming in at 16.1 MMb/d.
Vessel traffic monitored by EDA along the Gulf Coast decreased W-o-W. There were 19 vessels loaded for the week ending February 28 and 27 the prior week. EDA expects US exports to be 3.6 MMb/d.
The SPR awarded contracts for 6.0 MMbbl to be delivered To Choctaw February – May and 2.475 to be delivered to Bryan Mount Jan – March 2025. The SPR has 395 MMbbl in storage as of February 28, 2025.
Regulatory and Tariffs:
Presented by ARBO
Tariffs:
Gray Oak Pipeline, LLC The Temporary Rate Reduction percentages for West Texas were reduced and temporary volume incentive rates were increased. FERC No 2.25.0 IS25-232 (filed February 20, 2025) Effective April 1, 2025.
Arrowhead Eagle Ford Pipeline, LLC A new destination was established to reflect the addition of Sunoco/NuStar’S South Texas System in San Patricio County, TX with the agreement of at least one non-affiliated shipper. A new pump-over charge was also added for deliveries to that location. FERC No 2.10.0 IS25-235 (filed February 21, 2025) Effective March 1, 2025.
The above information is provided by ARBO’s Oil Pipeline Tariff Monitor. For more information on regulatory proceedings or tariff rates, please contact please contact Corey Brill via email at corey@goarbo.com or phone at 202-505-5296. https://www.goarbo.com/
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