Rigs targeting oil and natural gas in the U.S. fell to the lowest level in seven weeks because of a drop in vertical rigs, mostly in Texas, according to Baker Hughes Inc.
The rigs declined by 11 this week to 1,757, data from Baker Hughes showed. Texas, home to almost half of U.S. rigs, lost 10 to 835 as producers in the region warned they may miss output forecasts because of winter weather. The state accounted for 91 percent of the total drop.
“It’s not surprising to see the U.S. rig count’s down here with some of the weather and holiday issues that were expected going into the fourth quarter,” Marc Bianchi, a Cowen & Co. analyst based in New York, said by phone today.
The total count slipped by six from a year earlier, even as domestic oil output surged to the highest level in more than two decades, boosted by new technologies.
Horizontal rigs, the type used for unconventional tight oil production, have tripled since 2009 as vertical rigs have fallen to almost a third of their peak the same year. Oil output per rig in North Dakota’s Bakken formation and Texas’s Eagle Ford play is forecast to rise to records next month, the Energy Information Administration said in a Dec. 9 report.
“More horizontal drilling in the Bakken and Eagle Ford shale plays has helped propel U.S. oil production 32.7 percent since 2003 to a two-decade high,” Mehdi Menouar, oil and gas services analyst for Bloomberg Industries in Skillman, New Jersey, said in a research note Dec. 23. “U.S. shale development may increase demand for rigs and oil services given the high-service intensity of horizontal wells.”
Horizontal rigs gained by six this week to 1,146, and producers added one new directional rig, Baker Hughes reported. Vertical rigs dropped by 18 to 387.
“The number of horizontal rigs has run up at a pretty healthy rate,” Bianchi said. “The rigs that are added may end up displacing some of the older, less capable rigs.”
Oil rigs decreased 13 to 1,382, Baker Hughes said.
U.S. oil output rose 0.7 percent to 8.11 million barrels a day in the seven days ended Dec. 20, the highest level since September 1988, according to data compiled by the EIA, the Energy Department’s statistical arm. National output grew 18 percent in the previous year, the EIA data showed.
Crude stockpiles fell 4.73 million barrels last week to 367.6 million barrels, the least since Sept. 27, the EIA said.
West Texas Intermediate crude for February delivery rose 77 cents, or 0.8 percent, to settle at $100.32 a barrel on the New York Mercantile Exchange. It has gained 9.3 percent this year.
The gas count rose two to 374, the Houston-based field services company said.
U.S. gas stockpiles fell 177 billion cubic feet last week to 3.07 trillion, the EIA said today. Supplies were 16 percent below year-earlier inventories.
Natural gas for January delivery slid 2.6 cents, or 0.6 percent, to $4.407 per million British thermal units on the Nymex, up 32 percent this year. The January futures expired at the close of floor trading today. The more-active February contract fell 10.8 cents to $4.368.