Rigs targeting natural gas in the U.S. dropped to the lowest level in 21 years this week as producers pulled equipment from plays across the U.S. and ramped up drilling in the oil-rich Permian Basin of Texas.
Gas-directed rigs slid by six to 310, the lowest level since 1993. Counts dropped in several basins from the Utica in the eastern U.S. to the Mississippian of Kansas and Oklahoma, data posted on Baker Hughes Inc.’s website show. Oil rigs jumped by 19 to 1,517, the most since the Houston-based field services company split the oil and gas rig counts in 1987, the company said.
Energy producers are shifting rigs away from dry gas and using hydraulic fracturing and horizontal drilling to extract record volumes of oil and lease condensate from U.S. shale formations, increasing the nation’s proved resources to the highest level in 36 years. The focus on liquids is increasing as crude trades more than 22 times higher than gas, up from 13 times higher five years ago.
“Shale oil remains king and is actually a major contributor to increased gas production because of associated gas coming out of the shale plays,” said James Williams, president of energy consulting firm WTRG Economics in London, Arkansas. “You’re going to keep drilling for oil until gas prices spike high enough.”
Natural gas for May delivery declined 3.5 cents, or 0.8 percent, to $4.62 per million British thermal units on the New York Mercantile Exchange, up 12 percent in the past year.
U.S. gas stockpiles climbed by 4 billion cubic feet last week to 826 billion, EIA data show. Supplies were a record 54.7 percent below the five-year average and 50.7 percent below year-earlier levels.
Total U.S. oil output climbed 37,000 barrels a day, or 0.5 percent, to 8.23 million in the week ended April 4, the highest level since 1988, data compiled by the Energy Information Administration, the U.S. Department’s statistical arm, show. Crude stockpiles rose 4.03 million barrels, or 1.1 percent, to 384.1 million.
Rigs targeting oil in the Permian Basin surged by 12 this week to 536, the highest since at least February 2011, Baker Hughes said.
ConocoPhillips, the largest U.S. independent oil and gas producer, plans to drill with about 10 rigs a year in North Dakota’s Bakken shale formation, the company said in an analyst meeting yesterday. In Texas’s Eagle Ford play, Conoco expects its production to reach 250,000 barrels a day by 2017, up from 160,000 in the first quarter.
“We’re in the sweetest of the sweet spots in the Eagle Ford, and we don’t think we’re done there,” Ryan Lance, Conoco’s chief executive officer, said at the meeting.
North Dakota averaged 193 rigs in March, up five from January, Lynn Helms, director of North Dakota’s Mineral Resources Department, said in conference call today.
“We’re seeing a slow, gradual increase in rig counts as competition in other basins begins to shake out,” Helms said. “People are finding that part of the Bakken-Three Forks play has the best rate of return of any of the shale basins.”
West Texas Intermediate crude for May delivery rose 34 cents, or 0.3 percent, to settle at $103.74 a barrel on the Nymex and has risen 11 percent in the past year.