Drilling-permit issuance across 30 U.S. states is decidedly up since 1994, according to a survey by Lehman Brothers. James D. Crandell, New York-based managing director, oil-services equity research, Lehman Brothers, contends there's a very strong relationship between drilling-permit issuance and rig count, based on his research during the past 20-plus years. In 1994, when domestic drilling-permit issuance reached about 2,300, the U.S. rig count stood at around 750. This year, the number of drilling permits in the U.S. issued has shot above the 4,400 mark while the rig count eclipsed 1,300. "We continue to believe the domestic rig count will move higher in the coming months as additional rigs are unstacked; however, growth will be limited by the number of available rigs and personnel," says Crandell. Bolstering this outlook are recent upward revisions to commodity-price forecasts by the equity-research group at JP Morgan Securities. In mid-September, that firm revised its 2005 Nymex forecast to $56.86 for oil from an earlier estimate of $51.56, and its 2006 forecast to $56.25 from a previous $48. On the natural gas side, the market-maker boosted its 2005 and 2006 forecasts to $7.96 and $7.80, respectively, from prior corresponding estimates of $6.85 and $6.50. Current consensus estimates for both years are roughly $7.40. Meanwhile, JPMorgan Securities' initial gas-price estimate for 2007 was recently set at $7.10.
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