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US rig count: This week, drillers add most rigs in 16 months

rig count

The US rig count rose this past week to 588.  US shale industry producers say with rising oil prices and tightening supplies, they expect to increase spending on new drilling. Pioneer Natural Resources photo.

US rig count up 20 to 588

Nov 18 (Reuters) -Nov 18 (Reuters) – U.S. oil companies added 19 drilling rigs this week, the biggest hike since July 2015, as shale producers cautiously redeployed cash amid OPEC’s plans to curb production and after Donald Trump’s presidential election victory.
Drillers added 19 oil rigs in the week to Nov. 18, boosting the total to 471, the most since January, but still below 564 a year ago, energy services firm Baker Hughes Inc said on Friday.

Since May, when U.S. crude prices hit $50 a barrel, drillers have added rigs in 22 of 25 weeks, with 155 additional oil rigs over that period.

Almost two-thirds of the rigs added since May, or 92, were in the Permian basin in west Texas and eastern New Mexico, bringing the total there up to 229, the most since October 2015.

As crude prices collapsed from over $107 a barrel in June 2014 to near $26 in February 2016, the number of oil rigs plunged from a record high of 1,609 in October 2014 to a six-year low of 316 in May 2016.

In Canada, the rig count was up by eight to 184.
On Friday, U.S. crude futures were trading above $45, on track to rise for the first week in four on hopes that the Organization of the Petroleum Exporting Countries might agree to limit production at a meeting at the end of the month.
In the longer term, Trump is expected to be an advocate for oil and gas drilling, who will slash regulations and encourage new energy industry development.
With oil prices expected to rise with a projected tightening of supplies and a leaner, more efficient U.S. shale industry, producers said they will follow through on plans to boost spending on new drilling.

“You’re starting to see a little bit of light at the end of the tunnel,” Ryan Lance, chief executive of ConocoPhillips , the largest independent U.S. oil producer, told Reuters last week. “We’re beginning to put capital back to work, but we’re being cautious.”

Futures were trading near $49 a barrel for calendar 2017 and near $51 for calendar 2018. “Natural gas and oil drilling activity should end the year within a few rigs of 600,” James Williams, president of energy consultant WTRG Economics in Arkansas, said this week in a note.

The combined oil and gas rig count was 588 in the week ended Nov. 18, according to Baker Hughes data. Most wells produce both oil and gas.

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, including Occidental Petroleum Corp and ConocoPhillips, planned to increase spending by an average of 39 percent in 2017 over 2016.

Cowen said that forecast 2017 increase followed an estimated 48 percent decline in 2016 and a 35 percent decline in 2015 for the 65 E&P companies it tracks.

That increased spending should boost the total number of oil and gas rigs to a forecast average of 634 in 2017 and 732 in 2018 from a projected 514 in 2016, Cowen said.

That compares with an average of 978 oil and gas rigs active in 2015, according to Baker Hughes data.

(Reporting by Scott DiSavino; Editing by Marguerita Choy and David Gregorio)

Posted in: Energy News

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