The U.S. oil and gas industry is experiencing a significant slowdown, with drilling activity dropping to levels not seen since late 2021. According to the latest data from Baker Hughes, the total number of active drilling rigs in the United States fell by 4 to 559 for the week ending June 6, 2025, marking a decline of 35 rigs compared to the same period last year. This sharp reduction reflects a broader trend driven by low oil prices, capital discipline, and technological efficiencies that allow producers to maintain output with fewer rigs. Meanwhile, international rig counts provide a contrasting picture, with some regions showing resilience. Investors, navigating this complex landscape, are prioritizing financial returns over aggressive production growth. This article delves into the latest rig count data across U.S. regions, compares it with international figures, explores investor priorities, and provides downloadable .csv files for detailed analysis.
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U.S. Rig Counts: A Regional Breakdown
The decline in U.S. drilling activity is uneven, with some shale basins hit harder than others. Below is a detailed breakdown of rig counts across key U.S. regions, based on the most recent Baker Hughes data and supplemented by industry reports:
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Permian Basin (West Texas and Eastern New Mexico): The nation’s largest shale play saw its rig count drop to 275, down 5 from the previous week and 35 lower than last year. The Permian accounts for roughly half of U.S. oil production but is facing challenges from maturing fields and low West Texas Intermediate (WTI) prices, currently hovering around $64.55 per barrel.
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Eagle Ford (South Texas): The rig count remained stable at 54, unchanged from the prior month but down significantly from 2024 levels. Operators in this region are focusing on completing drilled but uncompleted wells (DUCs) to optimize costs.
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Haynesville (Louisiana and East Texas): Gas-focused rigs in the Haynesville dropped to 42, a decrease of 2 from the previous month. Low natural gas prices, which hit a 32-year low of $1.80/MMBtu in February 2024, continue to suppress activity.
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Bakken (North Dakota and Montana): The Williston Basin, encompassing the Bakken, reported 32 rigs, up 2 from December 2024. Despite the slight increase, activity remains constrained by competition from the Permian.
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DJ-Niobrara (Colorado, Wyoming, Nebraska, Kansas): The rig count fell to 5, the lowest since January 2021, reflecting a 22% quarter-over-quarter reduction in completions activity. Infrastructure constraints and high water cuts are limiting growth.
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Marcellus/Utica (Pennsylvania, Ohio, West Virginia): Gas rigs in this region are minimal, with a nationwide gas rig count of 100. The Marcellus saw a drop to 26 rigs, the lowest since October 2021, driven by low gas prices.
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Anadarko (Oklahoma): The rig count decreased by 2 to 42, reflecting cautious operator strategies amid market uncertainty.
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Gulf of Mexico (Offshore): Offshore rigs dropped by 3 to 9, the lowest since September 2021. High costs and regulatory hurdles continue to dampen offshore activity.
The total U.S. rig count of 559 includes 442 oil rigs (down 9), 114 gas rigs (up 5), and 3 miscellaneous rigs (unchanged). This marks a 6% year-over-year decline, following a 5% drop in 2024 and a 20% plunge in 2023. Despite the reduced rig count, U.S. crude oil production remains near record levels at 13.408 million barrels per day (bpd), buoyed by efficiency gains and DUC completions.
International Rig Counts: A Comparative Perspective
Globally, drilling activity presents a mixed picture, with some regions maintaining or increasing rig counts despite market volatility. According to Baker Hughes’ international rig count for May 2025 (released on the last working day of the first week of June), the total international rig count stood at 1,015, up slightly from 1,002 in April 2025. Below are key highlights:
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Middle East: The region remains a stronghold, with 346 rigs, up 5% from last year. Saudi Arabia led with 104 rigs, followed by the UAE (56) and Iraq (52). High oil prices and state-backed investment continue to drive activity.
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Latin America: Rig counts rose to 188, a 3% increase year-over-year, with Brazil (45 rigs) and Argentina (38) leading due to offshore and shale developments.
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Africa: The rig count held steady at 112, with Nigeria (28) and Algeria (34) maintaining activity despite infrastructure challenges.
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Asia-Pacific: Rigs increased to 224, up 4%, driven by India (48) and China (42). Offshore exploration is a key growth area.
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Europe: The region saw a slight decline to 145 rigs, down 2%, with Norway (32) and the UK (28) focusing on offshore projects.
In contrast to the U.S., where private companies respond quickly to price signals, many international markets benefit from state-supported drilling programs, which cushion against price volatility. The global rig count (U.S. plus international) was 1,574 in May 2025, reflecting a more stable international outlook compared to the U.S. decline.
Investor Priorities in Oil and Gas
Investors in the oil and gas sector are increasingly focused on financial discipline rather than production growth, a shift from the boom-and-bust cycles of the past. Key priorities include:
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Capital Discipline: Companies like Diamondback Energy, which cut its 2025 capital budget by $400 million, are prioritizing shareholder returns through dividends and stock buybacks over aggressive drilling. This reflects a broader industry trend, with firms like Coterra Energy and Matador Resources reducing rig counts to align with market conditions.
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High Returns on Investment: Investors demand sustained WTI prices above $75 per barrel to justify new drilling, as current prices near $65 are close to the break-even point for many Permian wells. The focus is on high-margin, low-cost projects, with DUC completions costing $1.2 million versus $6.5 million for new wells.
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Efficiency and Technology: Technological advancements, such as longer laterals and optimized well spacing, allow producers to maintain output with fewer rigs. Investors favor companies that leverage these efficiencies to reduce costs and improve estimated ultimate recovery (EUR).
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ESG Considerations: Environmental, social, and governance (ESG) factors are gaining traction. Investors are wary of gas flaring (up to 8% of Permian production) and water management issues, particularly in the Delaware Basin, where water cuts reach 82%. Companies with strong ESG profiles are more likely to attract capital.
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Mergers and Acquisitions: Consolidation, exemplified by ExxonMobil’s $60 billion acquisition of Pioneer, is reshaping the industry. Investors support deals that enhance efficiency and reduce operational overlap, but they remain cautious about over-leveraging.
The industry’s maturity, coupled with investor emphasis on returns, suggests that the era of double-digit shale growth is over. As Harold Hamm of Continental Resources noted, shale is transitioning from a growth engine to a mature producer.
Challenges and Outlook
The U.S. drilling slowdown is compounded by external factors. Tariffs under the Trump administration have increased drilling costs, squeezing margins, while OPEC+ production increases have kept oil prices low, with WTI at $64.55. Infrastructure bottlenecks, such as insufficient gas takeaway capacity in the Permian, and technical challenges like parent well degradation (reducing child well EUR by 25-40%) further constrain activity.
Looking ahead, the EIA projects U.S. crude output will rise to 13.4 million bpd in 2025, despite lower rig counts, driven by DUC inventories that can buffer production for 4.1 months. Natural gas output is expected to increase to 104.9 billion cubic feet per day (bcfd), spurred by an 88% rise in spot gas prices. However, sustained recovery in drilling activity requires WTI prices above $75 and resolution of infrastructure constraints.
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Conclusion
The sharp decline in U.S. drilling activity, with a total rig count of 559, underscores the industry’s response to low prices, investor demands, and operational challenges. While the Permian and other basins see significant reductions, international markets like the Middle East and Latin America maintain steadier activity, supported by state investment. Investors are pushing for capital discipline, high returns, and ESG compliance, reshaping the industry’s priorities. As the U.S. navigates this downturn, leveraging DUCs and technological efficiencies will be critical to sustaining production. For stakeholders, the provided .csv files offer a starting point for deeper analysis of these trends.
All trends and data points indicate that we are still short by trillions of dollars in capital expenditures to meet standard decline curves. At Sandstone Asset Management, we are evaluating oil and gas deals daily. We don’t change how we do business based on rig counts, but individual well economics.
Sources: Baker Hughes, EIA, OilPrice.com, Reuters, DiscoveryAlert.com.au