U.S. oil drillers put rigs back to work this week, lifting the number in operation from a three-month low in a push to home in on their most profitable fields after crude prices sank to the lowest since 2010.
Rigs targeting oil jumped by 10 to 1,578 after sliding to the lowest level since August last week, Baker Hughes Inc. said on its website today. Those drilling for natural gas declined by six, the Houston-based field services company’s website. While oil rigs fell in Texas’s Eagle Ford formation and the Cana Woodford of Oklahoma, they picked up in the Utica in the eastern U.S. and the Permian Basin of Texas and New Mexico.
“The Permian is a tried and tested formula,” Matthew Jurecky, head of oil and gas research for the London-based research company GlobalData Ltd., said by telephone from New York. “The stuff that’d be more at risk is in the periphery, the immature plays. In the Permian, you’ve still got tons of acreage that you can drill for days and make money at $30 oil.”
The oil-rig count has fallen from a peak of 1,609 on Oct. 10 as companies slow drilling in response to a 26 percent slide in crude prices over the past four months. Hess Corp., one of the largest operators in North Dakota’s prolific Bakken shale formation, said this week that it plans to idle three rigs next year. The slump threatens to curb a production boom in U.S. shale fields that has helped bring gasoline prices at the pump below $3 a gallon for the first time since 2010 and shrink the nation’s dependence on imports.
Declines aren’t “going to be consistent every week,” James Williams, president of energy consulting company WTRG Economics, said today by telephone from London, Arkansas. “We’re still down 30 rigs. I still think we’re going to be near 1,500 by the end of the year.”
U.S. benchmark West Texas Intermediate crude for December delivery rose $1.61 to settle at $75.82 a barrel on the New York Mercantile Exchange. Prices are down 19 percent in the past year and capped the longest run of weekly declines in almost three decades.
This week Hess joined the growing pool of drillers, including Apache Corp. (APA) and Continental Resources Inc. (CLR), who’ve said they plan to run fewer rigs in some oil plays. The New York-based company will cut its count to 14 next year “in direct response to the lower oil prices,” Geurt Schoonman, vice present of the New York-based company’s Bakken division, told investors in a conference call Nov. 10.
Domestic oil output climbed 92,000 barrels a day in the week ended Nov. 7 to 9.06 million, Energy Information Administration data show. While rigs have dropped, their productivity has surged to record levels across all major oil fields, the agency said in a report Nov. 10. New crude output per rig will rise to a record 543 barrels a day in the Bakken in December and to 550 in the Eagle Ford, the report shows.
Rigs in North Dakota may fall below 180, down from 191 last month, as oil and gas operators stop renewing contracts on their least-efficient equipment, Lynn Helms, director of the state’s Mineral Resources Department, said in a conference call today.
Murphy Oil Corp. (MUR), an El Dorado, Arkansas-based oil and gas producer, said in a presentation today that the Eagle Ford is the most expensive of its major oil plays. Supply costs totaled $43.40 a barrel in the South Texas field in September, compared with $29.48 in Canadian offshore operations, the report shows.
U.S. gas stockpiles increased 40 billion cubic feet last week to 3.611 trillion, according to the EIA. Supplies were 6.2 percent below the five-year average and 5.7 percent under year-earlier inventories.
Natural gas for December delivery gained 4.3 cents to $4.02 per million British thermal units on the Nymex, up 12 percent in the past year.