May 25, 2018, by Scott DiSavino
(Reuters) – U.S. energy companies added the most oil rigs in both a week and a month since February as drillers continued to return to the well pad with crude prices at their highest since late 2014.
The total oil rig count rose by 15 to 859 in the week to May 25, the highest level since March 2015, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
For the month, the rig count rose by 34, its second increase in row, after rising 28 in April.
More than half the total oil rigs are in Permian basin in west Texas and eastern New Mexico, the nation’s biggest shale oil field. Active units there increased by 10 this week to 477, the most since January 2015. That was the biggest weekly increase in the basin since February.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 722 rigs were active as energy companies have been ramping up production in tandem with OPEC’s efforts to cut global output in a bid to take advantage of rising prices.
On Friday, however, U.S. crude futures fell by almost $3 to around $68 a barrel after OPEC and Russia said they were considering an increase in output. Earlier in the week, U.S. crude traded over traded over $72, their highest since November 2014. [O/R]
Looking ahead, crude futures were trading around $67 for the balance of 2018 and around $63 for calendar 2019.
In anticipation of higher prices, U.S. financial services firm Cowen & Co this week said the exploration and production (E&P) companies they track have provided guidance indicating a 13 percent increase this year in planned capital spending.
Cowen said those E&Ps expect to spend a total of $81.2 billion in 2018, up from an estimated $72.1 billion in 2017.
Cowen, which conducts its own count, said the total number of land oil and gas rigs fell by 13 this week to 1,057 due to private operators broadly distributed outside the major basins. Cowen noted the count in the Permian, the nation’s biggest shale oil basin, was flat week-over-week.
That compares with 1,040 in the Baker Hughes land rig count.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, last week forecast average total oil and natural gas rig count would rise to 1,020 in 2018 and 1,125 in 2019. The Simmons forecast includes both land and offshore rigs.
So far this year, the total number of oil and gas rigs active in the United States has averaged 990, up sharply from 2017’s average of 876. That keeps the total count on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.
Reporting by Scott DiSavino; Editing by Marguerita Choy