Earlier this week, energy companies in the United States added more natural gas and oil rigs amid rising prices of fuel. Last week, the gas and oil rig count had risen to 703, which is the highest figure recorded since March 2020.
The number of gas rigs in America rose to reach 146, which makes this new figure the highest since September 2019. On the other hand, the number of oil rigs rose to 557, which represents the highest figures since March 2020. This data was released in a report by Baker Hughes, an energy services firm.
Baker Hughes stated that in comparison to this time last year, the rig count had risen by 257, representing an increase of more than 50%. Gas and oil rig count is usually used as an early indicator of future output.
Since Russia invaded Ukraine in February, the American government has been calling for drillers in the country to produce more gas and oil in an attempt to decrease domestic prices and help reduce their dependence on Russian energy.
Despite the increasing rig count, the production of oil is still lower than the levels recorded prior to the pandemic. Federal energy data shows that in 2019, the production of crude oil in the United States was 12,300,000 barrels per day. This figure is expected to increase from the 11,200,000 million barrels per day recorded last year to an average of 12 million barrels per day this year. Projections for 2023’s expected production is 13 million barrels per day.
Currently, weekly production is still in single digits.
Thus far, the price of oil has increased by more than 45%, reaching $110 per barrel. In 2021, the price rose by 55%. Various energy companies plan to increase capital spending this year. For example, Cowen & Co., a financial services company, stated that the independent exploration and production firms it tracked were planning to increase their spending by almost 30% this year, which is quite an increase especially when compared to the 4% increase recorded last year.
This increase will follow the drops in capital expenditure recorded in 2019 and 2020, which stood at 12% and 48% respectively.
Forecasts from Piper Sandler had shown that the total rig count in the U.S. will increase to an average of 684 this year, hitting 784 in 2023. This is in comparison to the 2021 forecast made by Baker Huges, which stood at 478. Piper Sandler is an investment bank in the United States.
The annual average rig count was at its highest in 2012 when it hit 1,919, and it was at its lowest in 2020 at 433. As the unrest in Europe continues, interest in companies such as Alliance Resource Partners, LP (NASDAQ: ARLP) will increase, and development programs in the oil and gas segment will not be short of investor funding.
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