Rigs targeting oil and natural gas in the U.S. increased by seven this week to 1,782, according to Baker Hughes Inc. (BHI)
Oil rigs jumped 14 to 1,411, a six-month high, data posted on the company’s website show. The gas count dropped six to 369, the Houston-based field services company said. Miscellaneous rigs declined by one to two.
The total count has risen six of the past seven weeks, adding 40 rigs since Nov. 1, as producers increasingly use a combination of horizontal drilling and hydraulic fracturing to reach shale deposits of crude in Texas’s Permian Basin. The technological improvements have helped drive domestic oil production to the highest level in a quarter-century.
Rigs drilling horizontal targets in the Permian jumped 19 percent in the third quarter from a year earlier “as operators continue to shift toward unconventional drilling,” Vincent Piazza, a Bloomberg Industries oil analyst in Princeton, New Jersey, said in a research note Dec. 11. “The broader adoption of unconventional drilling has led to a resurgence in oil production.”
U.S. oil output rose to 8.08 million barrels a day last week, the highest level since October 1988, the Energy Information Administration, the Energy Department’s statistical arm, said Dec. 11. Crude stockpiles fell 2.7 percent to 375.2 million barrels.
West Texas Intermediate crude for January delivery fell 60 cents, or 0.6 percent, to $96.90 a barrel at 1:06 p.m. on the New York Mercantile Exchange, up 13 percent in the past year.
U.S. gas stockpiles dropped 81 billion cubic feet last week to 3.533 trillion, the EIA said yesterday. Supplies were 7.2 percent smaller than year-earlier inventories and 3 percent below the five-year average.
Natural gas for January delivery dropped 3.5 cents, or 0.8 percent, to $4.374 per million British thermal units on the Nymex, up 31 percent from a year ago.
Producers, including Pioneer Natural Resources Co. (PXD), Devon Energy Corp. (DVN) and EOG Resources Inc. (EOG), will spend almost $2 billion on drilling in the liquids-rich Wolfcamp shale play in the Permian next year, GlobalData, a London-based research and consulting firm, said in an e-mailed statement Dec. 11.
“The recent Wolfcamp Shale boom can be attributed largely to exceptional well economics,” Taryn Slimm, a GlobalData analyst in New York, said by e-mail. “Many companies have transitioned to horizontal development strategies, and several companies producing from the play are already seeing returns on investments from anywhere between 21 percent and 32 percent.”
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