Rigs targeting oil and natural gas in the U.S. fell by seven this week to 1,854, according to Baker Hughes Inc. (BHI)
The drop in oil rigs came a week after a 24-rig increase and is probably a result of rigs moving between jobs, which means they wouldn’t be counted, said Jim Williams, president of energy consultant WTRG Economics in London, Arkansas. That the gas rig count held steady shows that producers are returning to dry plays with natural gas futures at the highest seasonal level in five years.
“We’re going to see more increases in gas drilling,” Williams said by phone. “Prices are high enough that folks are starting to pay some attention to it.”
U.S. gas stockpiles rose 82 billion cubic feet last week to 981 billion, the lowest level for the time of year since 2003, EIA data show. Supplies were 50.1 percent below the five-year average and 44.6 percent under year-earlier inventories.
Natural gas for June delivery fell 4.5 cents to $4.674 per million British thermal units on the New York Mercantile Exchange. It has risen 10 percent since the start of the year.
The total count has risen by 97 rigs since the beginning of the year as producers use horizontal drilling and hydraulic fracturing to extract record volumes of oil and gas from U.S. shale formations. The boom in output has helped boost domestic oil supplies to the highest level in more than 80 years.
ConocoPhillips (COP) has acreage “right in the sweet spot” of Texas’s Eagle Ford and North Dakota’s Bakken shales that it plans to “exploit over the next few years,” Matthew Fox, the company’s executive vice president of exploration, said in a conference call with analysts yesterday.
The Houston-based company is running 12 rigs in the Eagle Ford alone and brought 48 wells online in the first quarter, he said in the call.
Exxon Mobil Corp. (XOM) was operating eight rigs in the Permian Basin of Texas and New Mexico in the first quarter and added two last month, David Rosenthal, the company’s vice president of investor relations, said in a call yesterday. Net output in the play has surpassed 90,000 oil-equivalent barrels a day, he said.
“Given the quality of the acreage that we have and the results we’ve had to date, I think it would be a reasonable expectation that we would likely grow that rig count over the course of the year,” Rosenthal said.
Total U.S. oil production slipped 8,000 barrels a day in the seven days ended April 25 to 8.35 million after reaching the highest level since 1988 a week earlier, according to data compiled by the Energy Information Administration, the U.S. Department’s statistical arm. Oil supplies rose 1.7 million barrels to 399.4 million, the most since 1931.
West Texas Intermediate crude for June delivery rose to $99.76 a barrel on the Nymex, up 1.4 percent this year.