Rigs targeting oil in the U.S. gained to a record this week as crude prices surged and energy producers ramped up drilling in the Eagle Ford shale formation of South Texas.
Oil rigs increased by three to 1,545, the highest level since Baker Hughes Inc. separated its oil and gas counts in 1987. Rigs targeting crude rose the most in the Eagle Ford shale, where the count added four to 210. Gas rigs climbed by one to 311, and the total count, including miscellaneous rigs, rose to 1,858, the Houston-based field services company said on its website.
Companies are expected to spend a record $165 billion on exploration and production in the U.S. this year, spurred by energy price gains and horizontal drilling that has helped draw record volumes of oil and gas out of U.S. shale formations. The boom has raised domestic crude production to the highest level in more than a quarter-century and brought the U.S. closer to energy independence than it has been in 29 years.
“There is room for additional upside amid the current commodity price environment and the potential for increased capital deployment into the U.S. markets stemming from geopolitical risk internationally, notably Iraq,” James West, an oil services and drilling analyst at Barclays Plc’s investment-banking unit in New York, said in a report June 18.
European benchmark Brent crude gained for a second week as the U.S. said it will send military advisers to Iraq to help repel militants in OPEC’s second-biggest oil producer. U.S. benchmark West Texas Intermediate crude for July delivery rose 83 cents, or 0.8 percent, to settle at $107.26 a barrel on the New York Mercantile Exchange, up 12 percent in the past year.
U.S. oil production climbed by 17,000 barrels a day, or 0.2 percent, in the week ended June 13 to 8.48 million, the highest level since 1986, data compiled by the Energy Information Administration show. Oil supplies dropped 579,000 barrels, or 0.2 percent, to 386.3 million, according to the EIA.
“High oil prices are making people money,” James Williams, president of energy consulting firm WTRG Economics in London, Arkansas, said by telephone today. “While we haven’t had big, stellar increases in the rig count, drilling is becoming increasingly more efficient in a lot of plays.”
New oil production per rig per day in North Dakota’s Bakken formation is expected to rise to a record 510 barrels in July, the EIA said in a June 9 report. Output in the Eagle Ford will increase to 479, also the most ever, the agency said. Gas yield per rig there is expected to climb to a record 1.29 million cubic feet a day.
U.S. gas stockpiles rose 113 billion cubic feet last week to 1.719 trillion, EIA data show. Supplies were 33 percent below the five-year average.
Natural gas for July delivery declined 5.3 cents, or 1.2 percent, to $4.531 per million British thermal units today on the Nymex, up 17 percent in the past year.
Rigs on land rose by four this week to 1,784. Rigs in inland waters were unchanged at 15. The offshore rig count, primarily in the Gulf, were also unchanged at 59.
Miscellaneous rigs, which usually drill for geothermal energy, were unchanged at two.
Energy rigs in Canada surged by 21 to 265, following a seasonal drilling pattern.