U.S. Baker Hughes Energy Rig Count Drops by 7 to 1,761

Energy rigs in the U.S. fell by seven to 1,761 this week as natural gas rigs decreased for the first time in three weeks, according to Baker Hughes Inc.

Gas equipment dropped by 15 to 386, the Houston-based field services company said today on its website. Oil rigs jumped by eight to 1,369. The miscellaneous count was unchanged at six.

The oil total has increased as domestic crude output climbed to the most since 1989, with producers using hydraulic fracturing and horizontal drilling to reach shale deposits. The resurgence helped the U.S. meet 87 percent of its energy needs in the first five months of 2013, on pace to be the highest annual rate since 1986.

“Higher oil rigs fit with higher oil prices and lower gas rigs with still relatively low gas prices,” said James Williams, a drilling consultant and president of WTRG Economics in London, Arkansas.

U.S. crude has increased 14 percent in the past year and on Sept. 6 reached $110.53 a barrel, its highest close since May 2011. Natural gas is down 16 percent from the year’s high on April 19, and is 7.3 percent below its five-year average price.

U.S. oil output rose to 7.83 million barrels a day last week, the U.S. Energy Information Administration said Sept. 18. Production has increased 12 percent so far this year after a 19 percent gain in 2012.

Vertical Equipment

The verticals rigs declined by 23 to 421, while horizontal rigs increased by 15 to 1,091 and directional rigs added one to 249, according to Baker Hughes.

“Many of the horizontal oil wells will pay back the cost of drilling in the first year,” compared with a longer time frame for vertical wells, Williams said in a phone interview. “In a sense it’s a short-term decision. If the prices are high today, the chances of prices changing enough to make drilling uneconomic in the first 12 months is a whole lot lower than with a vertical well.”

U.S. gas stockpiles gained 46 billion cubic feet last week to 3.299 trillion, the EIA, the Energy Department’s statistical arm, reported yesterday. Supplies were 5.4 percent below year-earlier levels and 0.5 percent above the five-year average.

Before it's here, it's on the Bloomberg Terminal.