U.S. energy firms this week added oil rigs for a fifth time in six weeks, keeping the rig count at its highest in over three years and crude production from shale basins at a record high.
Drillers added two oil rigs in the week to Nov. 16, bringing the total count to 888, still the highest level since March 2015, Baker Hughes, a GE company (NYSE: BHGE), said in its weekly report.
After rig additions stalled at five during the third quarter, drillers have added 25 rigs so far this quarter.
The U.S. rig count, an early indicator of future output, is higher than a year ago when 738 rigs were active because energy companies have spent more this year to ramp up production to capture prices that are higher in 2018 than 2017.
More than half the total U.S. oil rigs are in the Permian Basin, the country’s biggest shale oil formation. Active units there increased by one this week to 493, the most since January 2015.
U.S. crude output from seven major shale basins was expected to rise 113,000 barrels per day (bbl/d) to a record 7.9 million bbl/d in December, driven largely by increases in the Permian Basin of Texas and New Mexico, the U.S. Energy Information Administration (EIA) said this week.
The EIA also said producers drilled 1,577 wells and completed 1,308 in the biggest shale basins in October, leaving total drilled but uncompleted wells up 269 at a record high 8,545, according to data going back to December 2013. That was the most wells drilled in a month since February 2015 and the most completed in a month since March 2015, according to EIA data.
U.S. crude futures were trading around $57 per barrel on Nov. 16 after falling to their lowest since November 2017 earlier this week on concerns the global market is over supplied.
Looking ahead, crude futures for calendar 2019 and calendar 2020 were both trading about $58 per barrel.
U.S. financial services firm Cowen & Co. this week said E&P companies it tracks have provided guidance indicating a 25% increase this year in planned capital spending.
Cowen said the E&Ps it tracks expect to spend a total of $90.0 billion in 2018. That compares with projected spending of $72.2 billion in 2017. Cowen said early 2019 capital spending budgets were mixed.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast the average combined oil and natural gas rig count would rise from 876 in 2017 to 1,031 in 2018, 1,092 in 2019 and 1,227 in 2020.
Since 1,082 oil and gas rigs are already in service, drillers do not have to add any rigs for the rest of the year to hit Simmons’ forecast for 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,026. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.