Rig count in the Powder River basin, situated in Wyoming and Montana in the USA, has increased almost four-fold in the period from early April to mid-August during 2021.
This was the finding of GlobalData, a data and analytics company, who has noted the upswing in drilling due to rising and sustained US crude prices and says production of both crude oil and natural gas in the basin is expected to grow by a respective 28% and 13% by December 2022.
Svetlana Doh, Oil & Gas Analyst at GlobalData, comments: “Unlike other basins in the area, Powder River’s production nearly rebounded to pre-pandemic levels only four months after the onset of the pandemic. Production then kept a downward trend, at an average of -1% a month, but June 2021 saw an uptick in the number of rigs. This could signify a mitigation or even reversal of the trend.”
According to GlobalData’s latest report, ‘Powder River Basin Shale in the US, 2021 – Oil and Gas Shale Market Analysis and Outlook to 2025’, production in the Powder River basin somewhat recovered in June 2020 to 182mbd of crude oil and 957mmcfd of natural gas. Levels were consistently below these benchmarks for most of H1 2021.
Doh continued: “Drilling activity in the region was very slow. Even when WTI price rose to US$52 per bbl in January 2021, rig count was still only around four – 83% less than the number of rigs observed in February 2020 before the COVID-19 pandemic hit the US.”
The Powder River basin accounts for less than 5% of the country’s overall crude oil production in the country.
Doh adds: “Most players in the region have acreages elsewhere. For example, Occidental Petroleum, which holds the highest leaseholds of 400,000 net acres in Powder River, also owns significant positions across the Denver-Julesburg and Permian basins. The slow growth of drilling activities in Powder River could be because operators instead focused on high-return assets such as the Permian basin.
“Once oil price stabilized to over US$70 per bbl in June 2021, there was a rapid boost in the number of rigs, with an average 50% increase in rig count each month – until August, when the total rig count reached 17 for the whole basin.”
Looking forward, production of both crude oil and natural gas in Powder River is projected to see an upward trend to 2025. Indeed, natural gas production in the basin is expected to grow by 4% during 2021-25 to reach 1,026 mmcfd in 2025. On the other hand, crude oil production is expected to see steeper growth, at a compound annual growth rate (CAGR) of 7%.
Doh commented: “Both crude oil and natural gas are expected to exceed pre-pandemic production levels by 2022.”