The Zhitong Finance App learned that according to a research report released by UBS on Wednesday, US oil and gas producers are finding ways to increase production without significantly expanding drilling activities. This trend may keep the number of active rigs in the industry relatively stable in 2027.
UBS chief analyst Josh Silverstein said the third-quarter earnings update shows exploration and production companies are benefiting from faster drilling speeds, improved oil well performance, and longer horizontal wells. These improvements allow operators to increase production while maintaining the scale of existing equipment.
The findings are instructive for investors in oilfield service companies — companies whose revenue depends in part on demand for drilling rigs and completion equipment. Higher efficiency may limit the demand for additional rigs, even as production increases, which may limit the revenue growth of equipment suppliers while benefiting producers by reducing development costs.
Increased efficiency
Producers are increasingly using simultaneous hydraulic fracturing to complete wells more efficiently. Permian Resources reported drilling one of its fastest wells ever, while Gulfport Energy and Murphy Oil emphasized plans to adopt a continuous drilling program in 2027 to reduce downtime and improve supply chain efficiency.
Longer horizontal wells are also improving capital efficiency. Devon Energy reports that it has drilled a five-mile-long horizontal section of the Marcellus shale and plans to drill 50 four-mile long horizontal wells across its portfolio in 2027. Antero Resources has completed its longest five-mile horizontal section to date and is considering drilling more than 30,000 feet (9.14 km) of wells on the newly acquired land.
Service Costs and Inflationary Pressure
UBS said that in 2027, producers are facing higher costs in terms of diesel, steel pipes, transportation and special equipment. However, companies are trying to limit their impact through advance purchase agreements. EOG Resources has locked in approximately 60% of its service requirements in 2027 and secured around half of its casing and tubing requirements.
The number of rigs is relatively stable
According to UBS Evidence Laboratory data, the average number of active rigs in the 48 states of the US is 634, a decrease of 1 from the previous week, but a 16% increase from the level at the end of 2025. Among them, oil-guided drilling rigs have increased 36% since the end of last year, and natural gas-guided drills have declined by 24%.
Among the main operators, ExxonMobil (XOM.US) is still the listed manufacturer with the most active rigs, with 37 units, followed by Devon Energy (DVN.US) and ConocoPhillips (COP.US) with 30 units each, EOG Resources (EOG.US) with 23 units, and Occidental Petroleum (OXY.US) with 21 units. Including integrated manufacturers, companies covered by UBS together account for 44% of active rigs.
The report suggests that investors should pay more attention to drilling productivity, capital efficiency and fuel service pricing, rather than simply relying on the number of rigs as indicators of industry growth. UBS anticipates that efficiency improvements will support production growth without a significant acceleration in drilling activity next year.