03 December 2016, Houston — U.S. energy companies extended their recovery in oil drilling into a seventh month this week as they follow through on plans to add rigs as crude rose to its highest price in over a year.
Drillers added three oil rigs in the week to Dec. 2, bringing the total count up to 477, the most since January, but still below the 545 rigs seen a year ago, energy services firm Baker Hughes Inc said on Friday.
Since crude prices recovered from 13-year lows to around $50 a barrel in May, drillers have added a total of 161 oil rigs in 24 of the past 27 weeks, its biggest recovery since a global oil glut crushed the market over two years.
Almost two-thirds of the rigs added since May, or 98, were in the Permian basin in west Texas and eastern New Mexico, bringing the total in the biggest U.S. oil shale formation up to 235, the most since October 2015.
The Baker Hughes oil rig count plunged from a record 1,609 in October 2014 to a six-year low of 316 in May as U.S. crude collapsed from over $107 a barrel in June 2014 to near $26 in February 2016.
U.S. crude futures were trading around $51 a barrel on Friday, near Thursday’s 14-month high, after the Organization of the Petroleum Exporting Countries this week agreed to cut production for the first time in eight years. [O/R]
That put the front-month on track for its third week of gains in a row, putting the contract up about 18 percent since mid November.
Those higher prices have encouraged U.S. producers to pump more oil from shale fields in Texas and North Dakota where costs have roughly halved since 2014.
Rather than killing the U.S. shale industry, OPEC’s two-year effort to maintain market share by driving down prices and push higher-cost producers out has made U.S. shale a stronger rival.
Analysts expect U.S. energy firms to boost spending on drilling and increase production in coming years with crude prices expected to continue climbing.
Futures for calendar 2017 were trading around $54 a barrel, while calendar 2018 was fetching almost $55.
Analysts at U.S. financial services firm Cowen & Co said in a note this week that its capital expenditure tracking showed 18 exploration and production (E&P) companies planned to increase spending by an average of 36 percent in 2017 over 2016.
That spending increase in 2017 followed an estimated 48 percent decline in 2016 and a 35 percent decline in 2015, Cowen said according to the 64 E&P companies it tracks.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, forecast the total oil and natural gas rig count would average 506 in 2016, 699 in 2017 and 909 in 2018. Most wells produce both oil and gas.
That compares with an average of 978 oil and gas rigs active in 2015, according to Baker Hughes data.
The combined oil and gas rig count rose by 4 to 597 in the week ended Dec. 2, according to Baker Hughes data.
*Scott DiSavino; Editing: Marguerita Choy – Reuters