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Rigs Fall to 22-Month Low on More ‘Prolific’ Drilling

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Jan. 18 (Bloomberg) -- Gas and oil rigs in the U.S. dropped for the eighth straight week to the lowest level since March 2011 as more efficient drilling technologies weakened energy producers’ demand for new equipment.

Total energy rigs fell by 12 to 1,749, data posted on Baker Hughes Inc.’s website show. Oil rigs declined by seven to 1,316 this week, the lowest level in almost 10 months. The gas count dropped by five to 429, the field-services company based in Houston said.

The U.S. oil rig count has fallen every month since August as crude supplies climbed and producers’ demand for new rigs slipped. The gas count has shrunk to almost a fourth of its peak in August 2008 as energy companies moved equipment away from dry-gas plays to target more lucrative liquids.

“A number of operators such as Whiting are replacing rigs with more efficient pad-capable drilling rigs,” John Kelso, a spokesman for Denver, Colorado-based Whiting Petroleum Corp., the third-largest leaseholder in the Bakken play, said by e-mail on Jan. 14. “An operator can drill just as many wells with fewer rigs.”

Crude for February delivery on the New York Mercantile Exchange climbed 7 cents to settle at $95.56 a barrel, down 5 percent from a year ago.

Rising Output

U.S. oil output rose 39,000 barrels a day to 7.04 million last week, the highest level since January 1993, according to data compiled by the Energy Information Administration, a division of the Energy Department. Stockpiles slipped 0.3 percent to 360.3 million barrels in that same period. Supplies reached a 22-year high of 387.3 million barrels in June.

The vertical rig count tumbled for the eighth time in nine weeks, falling 18 to 442, the lowest in three years. The horizontal rig count, typically associated with shale and tight oil plays, gained eight to 1,127.

“The horizontal wells are far more prolific, with higher initial production and faster payback,” James Williams, president of WTRG Economics in London, Arkansas, said by telephone. “This drop doesn’t necessarily mean lesser exploration or fewer wells. It just means more efficiency and rigs spending less time over the hole.”

Natural gas for February delivery gained 7.2 cents, or 2.1 percent, to $3.556 per million British thermal units on the Nymex. Futures are up 44 percent from a year ago.

Gas stockpiles fell 148 billion cubic feet last week to 3.168 trillion, the EIA said yesterday. Supplies were 4.4 percent below year-earlier levels, the widest deficit in 17 months.

To contact the reporters on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net; Richard Stubbe in Houston at rstubbe1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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