Oil Rigs Rebound From Two-Month Low as Permian Recovers

Rigs targeting oil in the U.S. gained for the first time in four weeks weeks as horizontal drilling in the Permian Basin increased to a record following icy storms last month.

Oil rigs rose by 15 to 1,393, data posted on Baker Hughes Inc.’s website show. The gas count dropped 15 to 357, the Houston-based field services company said. Rigs drilling horizontally for crude in the Permian Basin of Texas and New Mexico jumped by five to a record 211. The total U.S. horizontal rig count rose by 10 to 1,158, the most in more than a year.

The oil count rose from a two-month low as drilling recovered from a series of December storms that triggered power and equipment failures. Energy producers from Chevron Corp. to ConocoPhillips pumped less oil and gas in the fourth quarter as bad weather and repairs hindered operations.

The biggest rebound was in the Permian, “where drilling is clearly at the highest level we’ve ever seen,” James Williams, president of energy consulting firm WTRG Economics in London, Arkansas, said by telephone.

U.S. oil output rose 24,000 barrels a day to 8.15 million in the week ended Jan. 3, the most since 1988, according to the Energy Information Administration, the Energy Department’s statistical unit. Crude stockpiles declined 2.68 million to 357.9 million.

West Texas Intermediate crude for February delivery increased $1.06, or 1.2 percent, to settle at $92.72 a barrel on the New York Mercantile Exchange, down 1.2 percent in the past year. Crude futures declined 3.8 percent in the three months ended Dec. 31.

Stockpiles Drop

U.S. gas stockpiles dropped 157 billion cubic feet last week to 2.817 trillion, the EIA said. Supplies were 10.1 percent below the five-year average and 15.8 percent less than last year’s stocks for the week.

Natural gas for February delivery rose 4.8 cents, or 1.2 percent, to $4.053 per million British thermal units on the Nymex, up 27 percent from a year ago.

Drilling activity in both the U.S. and the North Sea declined in the fourth quarter “primarily due to weather delays,” Baker Hughes said in a statement today.

Onshore wells completed in the U.S. fell 19 to 9,056 last quarter, according to Baker Hughes. The total was up 4.6 percent from a year earlier even as the number of active rigs fell due to improvements in drilling efficiency.

“The average U.S. onshore drilling rig now produces 9 percent more wells compared to the same quarter last year,” the company said.

Eagle Ford

Wells rose the most in Texas’s Eagle Ford play, where the count surged by 75, or 7 percent, to 1,171. Wells completed in the Mississippian and the Marcellus basins also jumped last quarter.

Crude prices should “remain in a fairly stable range” of $85 to $95 a barrel over the next two years, supporting more unconventional and deepwater drilling, Stephen Gengaro, an oil service analyst for Sterne Agee & Leach Inc. in New York, said in an e-mailed research note today.

The U.S. rig count should increase by about 3.6 percent this year with gains in both the oil and gas counts, and growth should accelerate in 2015, Gengaro said.

“The combination of drilling efficiencies, high service intensity in non-conventional plays, and increasing deepwater drilling will fuel solid revenue growth for oil service companies,” he said.

Rigs on land gained by seven this week to 1,677. Rigs in inland waters were unchanged at 20. The offshore rig count, primarily in the Gulf, declined by four to 57.

Miscellaneous rigs, which usually drill for geothermal energy, rose by three to four.

Energy rigs in Canada surged by 195 to 477, following a seasonal pattern that rises in the winter.

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