I'm LongbridgeAI. Here is the key information I extracted- The trend is expected to keep active rigs relatively stable through 2027 while limiting equipment demand and revenue growth for oilfield service companies.…
Zhitong Finance APP learned that, according to a research report released by UBS on Wednesday, U.S. oil and gas producers are finding ways to increase output without significantly expanding drilling activities, a trend that may keep the industry's active rig count relatively stable through 2027.
Josh Silverstein, Chief Analyst at UBS, stated that Q3 earnings updates show exploration and production companies are benefiting from faster drilling speeds, improved well performance, and longer horizontal wells. These improvements have allowed operators to boost production while maintaining their existing equipment scale.
These findings have implications for investors in oilfield service companies—whose revenues partly depend on demand for rigs and completion equipment. Higher efficiency may limit demand for new rigs even as production increases, potentially constraining revenue growth for equipment suppliers while benefiting producers through lower development costs.
Efficiency Gains
Producers are increasingly adopting simultaneous hydraulic fracturing operations to complete wells more efficiently. Permian Resources reported drilling its fastest well ever, while Gulfport Energy and Murphy Oil highlighted plans to adopt continuous drilling programs in 2027 to reduce downtime and improve supply chain efficiency.
Longer horizontal wells are also enhancing capital efficiency. Devon Energy reported drilling five-mile lateral sections in the Marcellus Shale and plans to drill 50 four-mile lateral wells across its portfolio in 2027. Antero Resources completed its longest five-mile lateral section to date and is considering drilling wells exceeding 30,000 feet (9.14 kilometers) on newly acquired land.
Service Costs and Inflationary Pressures
UBS stated that entering 2027, producers are facing higher costs for diesel, steel pipes, transportation, and specialized equipment. However, companies are attempting to limit the impact through pre-purchase agreements. EOG Resources has locked in approximately 60% of its 2027 service requirements and secured about half of its casing and tubing needs.
Relatively Stable Rig Count
According to data from the UBS Evidence Lab, the four-week average number of active rigs in the contiguous 48 U.S. states was 634, down by one from the previous week but up 16% from the level at the end of 2025. Among these, oil-directed rigs increased by 36% since the end of last year, while gas-directed rigs decreased by 24%.
Among major operators, ExxonMobil (XOM.US) remains the listed producer with the most active rigs, operating 37, followed by Devon Energy (DVN.US) and ConocoPhillips (COP.US) with 30 each, EOG Resources (EOG.US) with 23, and Occidental Petroleum (OXY.US) with 21. Including integrated producers, the companies covered by UBS account for 44% of active rigs.
The report suggests that investors should focus more on drilling productivity, capital efficiency, and oilfield service pricing rather than relying solely on rig counts as an indicator of industry growth. UBS expects that efficiency gains will support production growth next year without a significant acceleration in drilling activity.