First sign of a US drilling recovery emerges in rigs

(MENAFN- Gulf Times) There's good news and bad news for the energy industry in Baker Hughes Inc rig counts.

An unprecedented retreat from America's oil fields dragged on for a 29th straight week, with the number of rigs targeting crude slumping to the lowest since 2010. That was more than offset by a rebound in gas exploration, which spurred the first increase in total US drilling in more than six months.

Five new gas rigs were enough to boost the total rig count by two, ending a record streak of declines that began in early December as America's oil explorers sidelined more than half their drilling equipment. The crude they were pumping out of US shale formations helped create a global glut that drove prices down 49% in the second half of 2014.

"This is the first sign that we may see a drilling recovery in the second half of the year," James Williams, president of energy consultancy WTRG Economics, said by phone from London, Arkansas. "Drilling contractors like Halliburton, Baker Hughes and Cameron should be celebrating because it didn't get any worse this week. These days, that's worthy of a small celebration."

Rigs drilling for oil fell by three this week to 628, the least since August 6, 2010, as those targeting natural gas jumped to 228, Baker Hughes said on its website Friday. The total count, which includes three miscellaneous rigs, gained to 859.

US oil and gas explorer WPX Energy Inc said on Thursday that it plans to raise its rig count by two this year and resume well completions in the Williston Basin, home of North Dakota's Bakken shale.

Even with the collapse in oil drilling, the US pumped 9.61mn bpd of crude in the week ended June 5, the highest in weekly Energy Information Administration data since 1983. The agency forecast that production from tight-rock formations such as the Bakken and Texas's Eagle Ford shale will shrink 1.3% to 5.58mn bpd this month.

America's gas production is rising for the 10th straight year, driven by gains from the Marcellus shale in the eastern US Inventories have rebounded faster than the five-year average since the stockpiling season began in April, wiping out a deficit that had persisted November 2013.

Natural gas futures for July delivery fell 7.7 cents on Friday to settle at $2.773 per million British thermal units on the New York Mercantile Exchange.

US benchmark West Texas Intermediate oil for August delivery fell 7 cents to settle at $59.63 on the Nymex. While futures have climbed 12% this year, they're down 44% from a year ago.

This year's rise in oil prices, coupled with a decline in drilling and completion costs, may spur enough of a rebound in new oil production to stave off a drop in US crude supply, Bloomberg Intelligence analysts Vincent Piazza and Syarifa Galeb said in a report Wednesday.

"Shorter-cycle, just-in-time inventory helps to steady production," they said. "Output may remain resilient in the near-term."

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