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U.S. oil rigs rise to record as Eagle Ford drilling gains

LYNN DOAN and RICHARD STUBBE

HOUSTON (Bloomberg) -- Rigs targeting oil in the U.S. advanced to a record this week as energy producers ramped up efforts to drill horizontally for crude in Texas’ Eagle Ford shale formation. Natural gas rigs fell to a 19-year low.

Oil rigs jumped 12 to 1,473, the highest level since Baker Hughes Inc. separated its oil and gas counts in 1987. The Eagle Ford shale play gained the most, adding nine oil rigs to 200, its highest since January. Horizontal rigs made up 87% of the total count in the formation of South Texas.

A combination of hydraulic fracturing and horizontal drilling is helping producers reach U.S. shale deposits of oil from North Dakota to Texas, boosting domestic crude output to the highest in a quarter-century and bringing the nation closer to energy independence than it has been in 27 years.

“Companies have drilled 30,000 horizontal wells each year since 2006,” Michael Cohen, an analyst at Barclays Plc in New York, said in a research note. Service companies expect producers to “re-fracture tens of thousands of these in the coming years.”

Total U.S. oil output rose 33,000 bpd, or 0.4%, in the week ended March 14 to 8.22 million, the most since May 1988, data compiled by the Energy Information Administration (EIA) show. Crude stockpiles climbed 5.85 MMbbl to 375.9 million.

West Texas Intermediate crude for May delivery increased 98 cents, or 1%, to $99.88 a barrel at 1:37 p.m. on the New York Mercantile Exchange, up 8.1% in the past year.

U.S. gas stockpiles dropped 48 Bcf last week to 953 billion, EIA data show. Supplies were a record 47.9% below the five-year average and 49.4% below year-earlier levels.

Natural gas for April delivery slipped 5.4 cents, or 1.2%, to $4.315 per million British thermal units on the Nymex. The price is up 9.6% in the past year.

Gas rigs in the U.S. slid by 18 to 326, the fewest since May 1995, bringing the total count including miscellaneous rigs down six to 1,803, Baker Hughes said on its website.

The Eagle Ford region lost the most gas rigs, dropping 14 to 19, meaning some rigs previously labeled as targeting gas may have been reclassified as drilling for oil, James Williams, WTRG Economics in London, Arkansas, said by telephone.

“The drop in gas rigs was a surprise,” he said. “I would have at least expected the count to remain flat.”

Producers are redirecting rigs away from dry-gas plays and toward more profitable liquids-rich areas, Energy Aspects Ltd., a research company in London, said in a report. It said the price would have to reach $6 per million Btu to make gas drilling competitive.

 

03/22/2014

 

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