US drillers add oil/gas rigs for first time in 12 weeks, Baker Hughes says

U.S. energy firms added seven oil and natural gas rigs this week, marking the first increase in 12 weeks and the largest weekly gain since December, according to Baker Hughes. This overall rise was primarily driven by a nine-rig increase in gas rigs to a four-month high, while oil rigs declined by two to their lowest since September 2021. Despite this weekly gain, the total rig count remains 7% below last year, reflecting a broader trend of reduced capital expenditures as producers prioritized shareholder returns. However, the surge in gas drilling aligns with EIA forecasts for a significant increase in spot gas prices and output in 2025, which is expected to incentivize further drilling activity, even as crude output is projected to grow despite anticipated price declines.

Analysis

The U.S. energy sector is showing a significant divergence between oil and natural gas activity. While the total rig count posted its first increase in 12 weeks, rising by seven to 544, this headline number masks contrasting underlying trends. The increase was driven exclusively by a nine-rig surge in natural gas rigs to 117, the largest weekly jump since July 2023 and a level not seen since March 2024, particularly concentrated in the Haynesville shale. Conversely, oil-directed rigs fell by two to 422, their lowest point since September 2021, with declines registered in the key Permian basin. This weekly data point occurs within a broader context of sustained capital discipline; the total rig count remains down 7% year-over-year, and independent E&P firms plan a further 3% capital expenditure cut in 2025. The ramp-up in gas drilling directly aligns with the U.S. Energy Information Administration (EIA) forecast for a 68% spike in spot gas prices in 2025, signaling that producers are positioning for a market recovery. Meanwhile, the EIA's projection for U.S. crude output to rise to a new record of 13.4 million bpd in 2025, despite fewer oil rigs and anticipated price declines, underscores significant ongoing efficiency gains in shale production.

Key Decisions for Investors

• Consider overweighting exposure to natural gas-focused E&Ps, particularly those with operations in the Haynesville shale, as the sharp increase in gas rigs signals producer confidence in the EIA's projected 68% price recovery for 2025.
• For oil-focused investments, prioritize companies demonstrating superior operational efficiency and low production costs, as the data indicates future output growth will be driven by productivity gains rather than increased drilling activity.
• Investors in the oilfield services sector should remain cautious, as the overarching trend of declining year-over-year rig counts and planned E&P capex cuts for 2025 suggests continued pressure on activity levels, despite the isolated weekly increase in the total count.