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Permian Oil Producers Keep Pumping; Baker Hughes Says Rigs Up 10th Straight Week

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No surprises here: U.S. oil producers are bolstering production in the early innings of 2017 as OPEC begins its six-month long production cut — a cut that many expect the oil cartel’s member countries will not honor.

Nevertheless, Baker Hughes (BHI) reported oil companies added 4 rigs over the past week, for the 10th consecutive weekly build. The net addition comes mainly from west Texas’ prolific Permian Basin, where a number of assets traded hands in the final months of 2016.

The activity also follows a larger-than-expected draw on domestic crude oil inventories during the frame. The EIA said crude inventories decreased by 7.1 million barrels for the week ending Dec. 30, 2016. However, at 479 million barrels, domestic inventories remain near the upper limit of the average range for this time of year, the EIA said.

Natural gas producers, meanwhile who saw prices hit a 2-year high in December, also continue to bolster operations, adding 3 rigs last week.

Baker Hughes U.S. oil rig count is now at 529, and the natural gas rig count is up to 135, bringing the total count, including miscellaneous rigs, to 665.

U.S. offshore drillers continue to tread water, however, adding 1 rigs during the week, bringing the count to 24. The count is down 3 year-over-year.

The Permian Basin, where operators like Diamondback Energy (FANG) RSP Permian (RSPP) and Rice Energy (RICE)  consistently achieve some of the greatest well economics in the country, is widely expected to see companies’ further bolster activity in 2017.

And indeed, producers in the play added rigs for the sixth consecutive week, bringing the rig count in the region to 267.

Other gainers this week were southern Texas’ Haynesville Shale with 2 added rigs and Appalachia’s Marcellus Shale with an addition of 1 rig.

Baker Hughes’ overall U.S. rig count has now surpassed where it was at this point last year when it was still headed in the opposite direction ahead of February’s decades low oil prices.

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Written by Tom Terrarosa

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