Energy Rigs in U.S. Tumble to Six-Month Low After Storm

Energy rigs in the U.S. tumbled to the lowest level in more than six months as producers worked to restore operations in the Gulf of Mexico after a tropical storm and more efficient drilling weakened demand for equipment.

Oil rigs fell by five to 1,367, data posted on Baker Hughes Inc.’s website show. The gas count dropped nine to 369, the Houston-based field services company said. The total count declined by 13 to 1,743, with the Gulf alone losing seven to 56.

Rigs declined in September by the most in nine months, losing 32, as producers leveraged new technologies to shorten drill times and bore more wells off single pads. The advances have weakened demand for new rigs and helped boost domestic oil production to the highest level in more than two decades.

“The storm accounted for about half of the drop in U.S. rigs,” James Williams, president of WTRG Economics in London, Arkansas, said by telephone. “We expect that to recover over the next week or two. We’re also seeing more efficient rigs, and that explains a lot of the lower rig counts across the board.”

Drillers yielded 5.37 wells on land for every rig in the third quarter of this year, up from 5.07 in the same period in 2012, according to data from Baker Hughes.

“On average, wells drilled per rig increased almost 6 percent,” Stephen Gengaro, an analyst with Sterne Agee & Leach Inc. in New York, said in an e-mailed research note today. The data “supports our belief that rising rig efficiency will fuel oil service growth that exceeds changes in the rig count.”

WTI Declines

West Texas Intermediate crude for November delivery fell 99 cents, or 1 percent, to $102.02 a barrel on the New York Mercantile Exchange, up 11 percent in the past year.

U.S. oil output totaled 7.81 million barrels a day last week, near a 24-year high, according to the EIA, the Energy Department’s statistical arm. Stockpiles rose by 6.81 million barrels, or 1.9 percent, to 370.5 million.

Natural gas for November delivery gained 5.3 cents, or 1.4 percent, to $3.776 per million British thermal units on the Nymex, up 4.8 percent from a year ago.

U.S. gas stockpiles rose 90 billion cubic feet last week to 3.577 trillion, the EIA said yesterday. Supplies were 3.7 percent below year-earlier inventories, the agency said.

Storm Shut-Ins

Tropical Storm Karen, which moved through the Gulf of Mexico last week, shut as much as 62 percent of the region’s oil output and 48 percent of natural gas production, according to the U.S. Bureau of Safety and Environmental Enforcement. Producers including Anadarko Petroleum Corp., BHP Billiton Ltd. and BP Plc began resuming operations and returning workers to platforms at week’s end.

Rigs on land fell by six this week to 1,668. Rigs in inland waters were unchanged at 17. The offshore rig count, primarily in the Gulf, declined by seven to 58.

Miscellaneous rigs, which usually drill for geothermal energy, rose one to seven.

The count in Texas slid by the most this week, dropping by eight to 822. Louisiana lost six to 106. Oklahoma’s count rose by seven to 178.

Energy rigs in Canada slipped by four to 357.

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