Rig activity continues to decline in the Permian Basin, weighed down by consolidation and operators’ drive to control spending. Rig counts in the Permian fell by 35, or 10% through the first half of 2024, from an average of 318 rigs in January to 288 in June ‘24. Several big E&P mergers have yet close and could pressure rig counts lower later this year.
While both sides of the Permian have lost rigs, the largest drop has occurred in the Delaware sub-basin. Overall, rig counts in the Delaware have fallen by 24 since the start of the year, a 15% decline, while the Midland is down 8 rigs, or 5% during the same period (see figure).
In the Delaware, public producers have been most actively shedding rigs. In the first six months of 2024, public operators dropped 16 rigs in the Delaware, or 14% of the total count. Large operators Occidental Petroleum (OXY), ExxonMobil (XOM) and Diamondback Energy (FANG) have each dropped 3 rigs since the start of the year. Both OXY and FANG guided to lower rig counts in the Permian at the start of the year. Meanwhile, private operators in the Delaware have reduced their rigs by 8, with names like Mewbourne and Point Energy Partners each dropping 2 rigs since the start of 2024.
M&A activity has driven much of the decline since 2023, though that seems less of a factor for recent activity as E&Ps elect to operate within cash flow. APA Corp. and Callon Petroleum represent one of the larger E&P mergers to close this year, and APA so far has maintained its legacy rig program and elected not to drop any of the inherited Callon rigs.
However, two of the larger deals have yet to close, including Occidental’s (OXY) acquisition of CrownRock and Diamondback’s purchase of Endeavor Energy Resources. CrownRock and Endeavor operate a combined 16 rigs that could be potentially lost if OXY and FANG choose to drop legacy rigs and only backfill their drilling inventory. – James Taylor Tickers: APA, FANG, OXY, XOM.
Is Crude Oil Heading into a Super Volatility Cycle? Join EDA’s Webinar July 18
East Daley will host our next Crude Oil webinar on July 18th. In ‘Crude Oil Heading into a Super-Volatility Cycle: We See it Coming Soon,’ EDA examines market factors likely to support price volatility ahead. We look at unexpected risks from commodity ties (Crude-NG-NGLs) and the facts about ’24 Crude Supply - will growth show up in 2H24? And is this bigger than a Permian story? Join the webinar on July 18th.
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