U.S. oil rigs surge to record as drilling jumps in Permian

Rigs targeting oil in the U.S. surged to a record this week as producers from Concho Resources Inc. to Pioneer Natural Resources Co. boost horizontal drilling in the Permian basin.

U.S. oil rigs jumped by 13 to 1,443, the highest level since Baker Hughes separated its oil and gas rig counts in 1987, the Houston-based company said in a weekly report posted on its website. Rigs drilling horizontally in the Texas- New Mexico formation rose by 10 to 265, the highest level since at least February 2011, while vertical rigs there gained three and the directional count added one.

“One could argue that all of the increase in the oil rig count this week was because of the Permian,” James Williams, president of WTRG Economics in London, Arkansas, said by telephone. “While it’s one of the oldest fields in the U.S., there are multiple producing formations there and companies are learning how to optimize horizontal drilling in them. The growth is evidence that they’re figuring it out.”

Hydraulic fracturing and horizontal drilling have unlocked shale deposits of oil from North Dakota to Texas, boosting crude output to the most in a quarter-century and cutting energy costs for industries from airlines to chemical plants. The increase also helped the U.S. meet 86 percent of its energy needs in the first 11 months of 2013, the highest level since 1986, Energy Information Administration data show.

Rig Output

Crude production per rig in the Permian is expected to climb to 98,000 bopd in March, up from 83,000 bopd, the Energy Information Administration, the Energy Department’s statistical arm, said in a Feb. 10 report.

Pioneer, which holds one of the largest positions in the Permian, is spending “the vast majority” of its 2014 drilling capital in northern areas of the basin such as Spraberry and Wolfcamp, Timothy Dove, the Irving, Texas-based company’s chief operating officer, said during a presentation March 4.

While Pioneer is drilling in a 300-ft-thick shale formation in Texas’s Eagle Ford play, the Permian offers shale thickness of 3,500 ft, Dove said. “So this is why this area has really substantial running room going forward,” he said.

Concho, the biggest Permian Basin operator drilling for oil, is adding four rigs throughout the year, E. Joseph Wright, the Midland, Texas-based company’s chief operating officer, said at a conference March 3.

More Growth

“When you look at our rate of growth going forward, in the last half of 2014, we’ll increase that rate of growth and on into 2015 as well,” Wright said.

U.S. oil output climbed 18,000 bopd last week to 8.08 MMbopd, EIA data show. Crude stockpiles jumped 1.43 MMbbl to 363.8 MMbbl.

West Texas Intermediate crude for April delivery rose $1.02, or 1%, to settle at $102.58/bbl on the New York Mercantile Exchange, up 12% in the past year.

U.S. gas stockpiles dropped 152 Bcf to 1.196 Tcf, EIA data show. Supplies were a record 38.8% below the five-year average and 43.2% below year-earlier levels.

Natural gas for April delivery dipped 0.9% to $4.618/MMbty on the Nymex and has risen 29% in the past year.

U.S. gas rigs jumped 10 to 345 this week, Baker Hughes said. The total rig count rose by 23 to 1,792, the highest level in more than a year.

“We may be finally be seeing some impact in the gas count from natural gas prices,” Williams said.

Iain McIntosh, Baker Hughes’s vice president for U.S. lands operations, said at a conference March 5 that the amount of time it takes to drill a gas well has fallen to less than 10 days in some cases from 40.

Rigs on land jumped by 23 this week to 1,719. Rigs in inland waters and miscellaneous rigs, which usually drill for geothermal energy, were unchanged at 18 and four, respectively. Offshore rigs, primarily in the Gulf of Mexico, were also unchanged at 55.

The count in Texas gained the most this week, up 20 to 864. Energy rigs in Canada fell by 39 to 587.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Mexco Energy Corp. announces drilling of properties, acquisition

Mexco Energy Corporation has announced the drilling of certain properties in the Permian basin of West Texas and the acquisition of producing properties in four states.

Mexco Energy Corporation is participating as a working interest owner in a JV drilling four vertical development wells to a depth of 11,000 ft on 160 acre spacing in the Dean, Wolfcamp, Cline and Atoka formations on 640 acres in Reagan County, Texas.  Initial per day production rates from two of these wells respectively are 128 bbl of oil and 110,000 cubic feet of natural gas and 94 bbl of oil and 179,000 cubic feet of natural gas.  Mexco' s working interest in this JV is .3% (.24% net revenue interest).

These wells will hold the deep rights for further development by horizontal drilling.  The Wolfcamp formation in this area is an approximately 1,700 ft thick section consisting of interbedded organic shales and carbonates and includes two reservoir units, the "A" and "B" benches that have both been successfully developed with horizontal wells.  These four vertical wells in Reagan County, Texas, are in addition to two horizontal wells in which Mexco is also participating in Reagan County, Texas.

Also, Mexco has acquired for $450,000, a package of non-operated producing properties consisting of 10 oil wells and 1 gas well located in Webster Parish, Louisiana; Eddy County, New Mexico; Billings County, North Dakota; and, Nolan and Smith Counties, Texas.  The purchase price was funded from the company' s $4.9 million bank credit facility.

This purchase, effective March 1, 2014, includes working interests ranging from 27.5% to .13% (net revenue interests of 24.06% - .11%) adding estimated net proved reserves of approximately 35,000 boe at a cost of $12.86 per bbl.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.