Oil Rigs at Record as Permian Drillers Fetch Higher Price

Rigs targeting oil in the U.S. climbed to a record this week amid higher crude prices that bolstered drilling in the Permian Basin of Texas and New Mexico, the nation’s largest onshore oil field.

Oil rigs rose by four to 1,562, the highest level since Baker Hughes Inc. separated its oil and gas counts in 1987. Gas rigs dropped three to 311, the Houston-based field services company said on its website. The Permian added the most, rising by six to 560, now accounting for one-third of the U.S. total.

Rotary rigs actively seeking oil and gas in the U.S. have surged by 117 in 2014 after two straight years of losses as producers use a record number of horizontally drilling ones to pull oil and gas out of shale formations amid higher energy prices. 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.

“Drillers are getting a high price for oil, and the Permian is a big play with a lot of formations,” James Williams, president of energy consulting firm WTRG Economics in London, Arkansas, said by telephone today. “The count is evidence that they’ve come up the learning curve on how to produce out of those various formations.”

North Dakota, home of the Bakken formation, and Texas, where both the Eagle Ford and Permian lie, now make up almost half of U.S. oil production as drillers target unconventional tight-oil and shale reservoirs, the Energy Information Administration, the Energy Department’s statistical arm, said in a July 1 report.

Oil Production

U.S. oil production slipped 4,000 barrels a day in the week ended June 27 to 8.44 million after rising earlier in the month to the highest level since 1986, EIA data show. Oil supplies slid 3.16 million barrels to 384.9 million, the agency said.

West Texas Intermediate crude for August delivery fell 42 cents to settle at $104.06 a barrel on the New York Mercantile Exchange.

U.S. gas stockpiles rose 100 billion cubic feet last week to 1.929 trillion, EIA data show. Supplies were 25.7 percent below year-earlier inventories.

Natural gas for August delivery gained 4.9 cents, or 1.1 percent, to $4.406 per million British thermal units today on the Nymex.

Rigs in the Williston Basin, where the Bakken is located, were unchanged at 178. North Dakota regulators approved a policy July 1 regulating natural gas flared from the Bakken and Three Forks formations.

“One of the things that might be inhibiting growth in the Bakken is the increased regulation,” Williams said. “What you’re doing there is simply economics.”

Rigs dropped the most this week in the gas-rich Marcellus formation of the eastern U.S., where the count fell by three to 79. Texas’s Eagle Ford lost one to 213.

In Canada, the rig count surged by 73 to 309, following a seasonal drilling pattern.

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