U.S. energy companies added oil rigs this week for a second week in a row, data showed March 23, as drillers followed through on plans to boost spending, encouraged by crude prices rising toward their highest in nearly three years.
Drillers added four oil rigs in the week to March 23, bringing the total count to 804, the highest since March 2015, Baker Hughes, a GE company (NYSE: BHGE), said in its weekly report.
More than half the total oil rigs are in the Permian Basin in West Texas and eastern New Mexico where active units increased by seven this week to 444, the most since January 2015. Those new rigs should help boost oil output in the Permian to a record high near 3.2 million barrels per day (MMbbl/d) in April, according to federal projections, representing about 30% of total U.S. oil production.
Baker Hughes said it will publish its next North American rig count report March 29 due to the Good Friday holiday on March 30.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 652 rigs were active. Energy companies have been steadily increasing spending since mid-2016 when crude prices began recovering from a two-year crash.
U.S. crude futures traded at about $65 per barrel this week, approaching the three-year high of $66.66 hit in late January, up sharply from the $50.85 average hit in 2017 and $43.47 in 2016.
Looking ahead, futures were trading at about $64 for the balance of 2018 and $59 for calendar 2019.
In anticipation of higher prices, U.S. financial services firm Cowen & Co. said 58 of the roughly 65 E&P companies they track have already provided guidance indicating an 11% increase this year in planned capital spending.
Cowen said those E&Ps that have reported capital plans expected to spend a total of $80.5 billion in 2018, up from an estimated $72.4 billion in 2017.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week forecast the total oil and natural gas rig count would average 1,015 in 2018 and 1,128 in 2019, the same as its projection last week.
So far this year, the total number of oil and natural gas rigs active in the U.S. has averaged 964, up sharply from an average of 876 rigs in 2017 and 509 in 2016, and not far from the total of 978 in 2015. Most rigs produce both oil and gas.
The U.S. Energy Information Administration projected this month that average annual U.S. production will rise to a record high 10.7 MMbbl/d in 2018 and 11.3 MMbbl/d in 2019. The current all-time peak was in 1970 at 9.6 MMbbl/d, according to federal energy data.