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Oil Rigs Advance With Bakken Drilling at 19-Month High

Rigs targeting oil in the U.S. climbed to a record as drillers sought out crude in the Williston Basin, one of the nation’s fastest-growing plays.

Oil rigs gained one to 1,589, data posted on Baker Hughes Inc.’s website show. Those targeting crude in the Williston Basin, home of the Bakken formation in North Dakota, rose by three to 194, the most since Jan. 18, 2013. The Denver-Julesburg Basin and Niobrara formation spread across Colorado and Wyoming also added five oil rigs to reach a record 46, the Houston-based field services company said in an e-mail.

The total U.S. rig count surged to the highest level in two years as producers use horizontal drilling and hydraulic fracturing to pull record volumes of oil and gas out of shale formations across the middle of the country. The boom will raise domestic crude production next year to the highest level since 1972, the Energy Information Administration said in a report Aug. 12.

“The Williston is going to be an area where we’re going to see a lot change hands this year,” James Williams, president of WTRG Economics in London, Arkansas, said by telephone today. “The newer players are going to show up in the rig count, and we may already be seeing some of this.”

Whiting Petroleum Corp. agreed last month to buy Kodiak Oil & Gas Corp. for about $3.8 billion in stock, turning it into the dominant crude producer in the Bakken, where output surged to 1.09 million barrels a day in June.

Well Costs

“Whiting may allocate more of their rigs” in the Bakken after buying Kodiak, said Evan Turner, lead oil and gas analyst at the London-based research firm GlobalData Ltd. “They’re going to be able to target the well inventory that Kodiak had and use their process since they’re a much more experienced producer in that area.”

Turner estimated Whiting’s cost per well at $6.5 million to $7 million in the Bakken, while Kodiak’s was $9 million to $9.5 million.

U.S. oil production jumped 103,000 barrels a day, or 1.2 percent, in the week ended Aug. 8 to 8.56 million, EIA data show. Output rose last month to the highest level since 1986. Oil supplies climbed 1.4 million barrels to 367 million.

West Texas Intermediate crude for September delivery gained $1.77, or 1.9 percent, to settle at $97.35 a barrel on the New York Mercantile Exchange, down 9.3 percent in the past year.

Gas Rigs

Rigs targeting gas in the U.S. jumped by five this week to 321, the highest since May, after the gas-rich Marcellus in the eastern U.S. added five to its count, Baker Hughes data show. Miscellaneous rigs fell by one to three.

“Most everybody in the Marcellus is targeting wet gas,” which more closely tracks oil prices than natural gas prices, Williams said.

U.S. gas stockpiles rose 78 billion cubic feet last week to 2.467 trillion, according to the EIA. Supplies were 18.9 percent below the five-year average and 17.7 percent under year-earlier levels.

Natural gas for September delivery fell 13 cents, or 3.3 percent, to $3.776 per million British thermal units on the Nymex, up 10 percent in the past year.

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