After a long slump, Oklahoma’s natural gas sector is once again showing signs of life. Rig activity across the state has rebounded sharply since mid‑2024, bucking the national trend and pointing to a renewed bullish outlook on natural gas. This momentum is fueled by a combination of rising prices, infrastructure improvements, export growth, and surging demand for power generation.
Although the overall U.S. rig count has remained mostly flat since late 2023, Oklahoma’s has climbed by more than 60 percent in less than a year. In July 2024, the state counted just 33 active rigs. By May 2025, that number had reached 55. This growth stands in sharp contrast to the national landscape, where producers have remained cautious amid fluctuating commodity prices and regulatory uncertainty.
Several factors are now converging to put Oklahoma back on the map as a key natural gas producer. From price movements to pipeline expansions and global market shifts, the industry is adapting to a new environment where natural gas is increasingly in demand. But challenges remain, particularly in productivity and infrastructure, and the extent of the rebound may depend on what comes next for exports, investment, and regulatory policy.
Prices, Exports, and Pipeline Pressure Reshape the Market
Natural gas prices in 2023 and early 2024 had dropped to their lowest levels in decades. At one point, Henry Hub prices slipped below $2 per million BTU, well below the profitability threshold for most producers in the region. In Oklahoma, this price pressure hit particularly hard, since the state’s drilling activity is weighted more heavily toward natural gas than oil.
Producers in regions like the Anadarko Basin depend on gas prices staying above $3.50 per million BTU to make new drilling economically viable. When prices fell, many operators paused exploration and drilling plans, leading to a collapse in rig counts. Even oil prices in the $70 per barrel range were not enough to drive renewed activity, because Oklahoma’s oil production is comparatively modest and often comes from gas-associated sources.
What changed? Several developments began to tilt the scales back in favor of natural gas.
First, prices started to rise again in late 2024 and early 2025. This came in part due to a tightening of domestic supply, but even more so from the massive expansion of U.S. liquefied natural gas exports. In 2016, the U.S. had no LNG export capacity. By 2025, the country is exporting nearly 15 billion cubic feet per day, with projections reaching 25 billion cubic feet per day by 2028.
This export demand has created a reliable floor under gas prices and signaled to producers that future returns are likely to remain strong. Unlike in the past, when excess gas often went unused or sold at a loss, producers now see clear market pathways to move their product abroad, especially to energy-hungry regions in Europe and Asia.
Second, infrastructure bottlenecks that had plagued other regions are beginning to ease. Nowhere was this more apparent than in the Permian Basin, where gas is often a byproduct of oil drilling. With limited pipeline capacity, prices at the Waha Hub in West Texas collapsed in 2024. At times, operators had to pay buyers just to take the gas off their hands. While Permian producers are still dominant, these price distortions gave Oklahoma a temporary advantage and incentivized activity in basins where takeaway capacity was not as constrained.
Looking ahead, several major pipeline projects are scheduled to come online between 2025 and 2026, which could improve transportation logistics and reduce volatility. This includes expansions in both the Permian and Midcontinent regions, potentially leveling the playing field and making Oklahoma more competitive with its neighbors.
Power demand is also lifting the outlook for natural gas. Nationwide electricity consumption is projected to grow at nearly 2 percent per year through at least 2026, with much of that growth coming from data centers, commercial buildings, and industrial users. While renewables like wind and solar continue to gain ground, natural gas remains the dominant source of electricity generation in the United States. It provides more than 40 percent of all capacity and plays a crucial role in balancing intermittent renewable supply.
This trend gives gas producers a double benefit. On one side, they have the global LNG market pulling demand from ports on the Gulf Coast. On the other, they have domestic utilities and grid operators pushing demand from power plants across the country.
For Oklahoma producers, this is the most favorable alignment of conditions in years.
Productivity Gaps and Long-Term Considerations
Despite the optimism, not everything is running at full speed. Oklahoma’s natural gas wells remain less productive than those in other parts of the country. In the Anadarko Basin, which covers much of western Oklahoma and parts of Texas and Kansas, the average well produces about 700 barrels of oil equivalent per day. That figure trails both the national average and output in prolific regions like the Permian and Haynesville.
This lower productivity means higher breakeven prices, and it forces companies to drill more wells to maintain the same level of output. The additional costs can eat into margins and slow the pace of growth, especially if prices retreat or service costs rise.
Rig efficiency and workforce availability also factor into the equation. Today’s rigs are more powerful and can drill longer laterals in less time than their predecessors, which means companies can do more with fewer rigs. That explains why rig counts, while helpful, do not always tell the full story about production volumes or employment trends.
Notes: Oil & Gas production is measured as the sum of oil production measured in barrels and gas production measured in barrels of oil equivalent (BOE), where 6 thousand cubic feet (MCF) = 1 BOE. Oil & Gas GDP and employment include Oil & Gas Extraction (NAICS 211) and Support Activities for Mining (NAICS 213). Sources: Energy Information Administration, Baker Hughes, Bureau of Economic Analysis, Bureau of Labor Statistics (Haver Analytics), authors’ calculations
Oklahoma, for instance, has seen drilling activity rise while energy employment has remained mostly flat. This reflects a broader industry trend toward automation, consolidation, and capital discipline. Many companies are focused on shareholder returns rather than growth for its own sake, and that has tempered the explosive expansion seen during earlier booms.
Still, the economic footprint of oil and gas remains substantial. The industry accounts for about 8 percent of Oklahoma’s gross domestic product and roughly 18 percent of state tax revenues. By contrast, it supports only about 1.7 percent of total employment, highlighting the sector’s high capital intensity and productivity relative to other parts of the economy.
From a state policy perspective, this creates both opportunity and risk. When prices are strong and drilling expands, tax collections rise and local economies benefit from increased investment. But when prices fall or activity stalls, the fiscal hit can be severe. This volatility makes long-term budgeting more difficult and increases the need for savings mechanisms like stabilization funds.
Another key issue is infrastructure readiness. As the industry grows, the state must ensure that roads, pipelines, and processing plants can handle increased volume. Delays in permitting or a lack of capital investment could bottleneck growth or reduce the competitiveness of Oklahoma producers in national and global markets.
Finally, regulatory policy remains a wild card. While federal methane rules and climate measures have been softened under the Trump administration, political tides can shift. Producers are aware that future regulations could again affect drilling economics, particularly if they raise compliance costs or introduce new emissions standards.
For now, however, the momentum is clear. Oklahoma’s natural gas sector has moved from a low point in 2023 to a renewed period of expansion. The state is attracting capital, putting rigs back to work, and participating in one of the most significant shifts in global energy markets in a generation.
Natural gas may not have the glamour of oil or the momentum of renewables, but it is proving to be the bridge fuel of choice for much of the world. And for Oklahoma, that bridge may be leading to a new era of growth.
