Released November 19, 2025 | SUGAR LAND
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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)
"The traditional link between rig activity and output has weakened recently, with production at record highs despite reduced rig counts," analyst at the U.S. Energy Information Administration (EIA), the statistical arm of the DOE, wrote Monday.
Upstream services firm Baker Hughes Company (Houston, Texas) listed 737 active rigs working across North America during the seven-day period ending November 14. That's about 6% below year-ago levels, though production trends, at least in the U.S., are holding up.
Over the four-week period ending November 7, EIA analysts put total U.S. crude oil production at 13.7 million barrels per day (BBL/d), about 1.6% higher than during the same period last year. IIR Energy in its NATGAS TODAY report for November 18 put total production from the Lower 48 states at 107.4 billion cubic feet, a low not seen since October.
Alaska and the U.S. Gulf of Mexico are marginal natural gas producers. The EIA expects Lower 48 gas production to average 115.4 billion cubic feet per day (Bcf/d) this year, a 4.5% increase from last year.
During the onset of the modern-era shale boom in the early 2000s, the Baker Hughes rig count would move markets due to the strong correlation between upstream activity and production, but operators are doing more with less by using multi-bore wells and laterals that can extend for miles in the horizontal direction away from the well pad.
July crude oil production of 11.4 million BBL/d for the Lower 48 marked an all-time high, while natural gas production set a record in August at 117.2 Bcf/d. That came even as rig activity slumped relative to year-ago levels.
By the Numbers
While natural gas prices are expected to rise, crude oil prices by next year could be well below the point at which many U.S. shale drillers can make a profit. And even though EIA analysts said the link between rig counts and production is unraveling, the agency said recently that drillers may need to up their game to at least sustain current production levels.
At the end of last year, the EIA found that horizontal wells accounted for 94% of the crude oil production and 92% of the natural gas production from the Lower 48 states. Improved drilling technology and gains in efficiency allow for operators to increase output, but well economies are declining and there may be a need to tap more expensive areas to keep up, EIA found.
Already, Bakken producers in North Dakota are moving out of the heart of the basin, state regulators said. Horizontal wells, regardless of length, tend also to have a high rate of production decline.
Key Takeaways
About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
Summary
Rig counts might not be indicative of production trends as well efficiencies improve, though forecasters say operators may need more drilling just to keep up.Rig Count Importance Fading
The historical association between upstream activity and production levels has weakened, according to the U.S. Department of Energy (DOE), with year-over-year production gains on the decline."The traditional link between rig activity and output has weakened recently, with production at record highs despite reduced rig counts," analyst at the U.S. Energy Information Administration (EIA), the statistical arm of the DOE, wrote Monday.
Upstream services firm Baker Hughes Company (Houston, Texas) listed 737 active rigs working across North America during the seven-day period ending November 14. That's about 6% below year-ago levels, though production trends, at least in the U.S., are holding up.
Over the four-week period ending November 7, EIA analysts put total U.S. crude oil production at 13.7 million barrels per day (BBL/d), about 1.6% higher than during the same period last year. IIR Energy in its NATGAS TODAY report for November 18 put total production from the Lower 48 states at 107.4 billion cubic feet, a low not seen since October.
Alaska and the U.S. Gulf of Mexico are marginal natural gas producers. The EIA expects Lower 48 gas production to average 115.4 billion cubic feet per day (Bcf/d) this year, a 4.5% increase from last year.
During the onset of the modern-era shale boom in the early 2000s, the Baker Hughes rig count would move markets due to the strong correlation between upstream activity and production, but operators are doing more with less by using multi-bore wells and laterals that can extend for miles in the horizontal direction away from the well pad.
July crude oil production of 11.4 million BBL/d for the Lower 48 marked an all-time high, while natural gas production set a record in August at 117.2 Bcf/d. That came even as rig activity slumped relative to year-ago levels.
By the Numbers
- 90% of oil and gas production came from horizontal wells
- 1.1% annual decline in Lower 48 crude oil production by next year
- 737 active rigs in North America are 6% below year-ago levels.
Efficiency Isn't Leading to Production Strength
Despite the gains in efficiency, year-over-year gains in production are on the decline. From year-ago levels, Lower 48 crude oil production should be 2.1% higher on average during 2025, but decline by 1.1% by next year. Lower 48 natural gas production should show a 4.5% increase from last year, but only a 0.3% gain year-on-year to 2026.While natural gas prices are expected to rise, crude oil prices by next year could be well below the point at which many U.S. shale drillers can make a profit. And even though EIA analysts said the link between rig counts and production is unraveling, the agency said recently that drillers may need to up their game to at least sustain current production levels.
At the end of last year, the EIA found that horizontal wells accounted for 94% of the crude oil production and 92% of the natural gas production from the Lower 48 states. Improved drilling technology and gains in efficiency allow for operators to increase output, but well economies are declining and there may be a need to tap more expensive areas to keep up, EIA found.
Already, Bakken producers in North Dakota are moving out of the heart of the basin, state regulators said. Horizontal wells, regardless of length, tend also to have a high rate of production decline.
Key Takeaways
- Rig counts are decoupling from production trends
- Efficiencies mean operators can do more with less
- Total production trends are diminishing year-on-year
About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
