Shale wildcatters pushed ahead on the biggest surge in U.S. oil drilling since 2012 as the explorers take advantage of prices above $50 for more than two months.
Rigs targeting crude in the U.S. rose by 6 to 597 this week, the highest total since October 2015, according to Baker Hughes Inc. data reported Friday. Drillers have added 72 rigs since 2017 began, the best start in five years. The expansion is spreading in Texas and Oklahoma, with the Granite Wash play leading the increase this time around.
Producers are cashing in on a more stable oil market, with prices swinging between $50 and $55 a barrel as the Organization of Petroleum Exporting Countries and 11 other nations cut back production to help reduce global supplies. Saudi Arabia told OPEC it reduced its oil output by the most in eight years, according to the group’s monthly report released Monday.
“We’re seeing the rise that we anticipated to take place given the OPEC cuts,” Bloomberg Intelligence analyst Andrew Cosgrove said by phone. “These gains are spreading to other plays, and this is something we’re expecting will continue through the first half given the stability in the price of oil.”
Oil producers have brought 281 rigs back to work since drilling bottomed out in May, the biggest gain since producers added 361 rigs over the nine months through June 2012.
U.S. crude inventories rose to 518.1 million barrels last week, the highest in weekly data going back to 1982, according to the Energy Information Administration.
Drilling is booming in a few shale plays — led by the Permian Basin in West Texas and New Mexico and the Scoop and Stack formations in Oklahoma — as they offer good returns at a $50 oil price. Producers including Diamondback Energy Inc. and Occidental Petroleum Corp. remain focused on the Permian, while Marathon Oil Corp. intends to double down on its assets in Oklahoma.
Diamondback climbed to a record close Wednesday after beating earnings estimates, while Occidental looks to sell assets in South Texas so it can continue to expand in the Permian. Marathon plans to double its number of rigs in the Scoop and Stack to 10 this year.
The Permian remains the most attractive play for investors this year, according to a Bloomberg Intelligence survey. The Midland and Delaware basins within the Permian helped the oilfield reach a new high of $26 billion in merger and acquisition activity last year.
This week other parts of Texas and Oklahoma began to shine, with the Granite Wash Basin adding five rigs and the Barnett Basin adding two.
“The Granite Wash is located in the Mid-Continent region, which is seeing a return of private operators,” said Cosgrove. “Given the rise in oil prices, this has become one of the basins that we anticipate will grow.”