The number of rigs at work onshore the U.S. is expected to rise, according to a Lehman Brothers analysis of the monthly drilling permits issued in 30 states.
Drilling permits rose by 0.9% in May, according to the analysts, James D. Crandell and James West. In Wyoming, permits dropped from 820 in April to 466 in May. This was offset by increases in Oklahoma (496 in April, 579 in May); Michigan (51 in April, 86 in May); Louisiana (198 in April, 228 in May); Kentucky (201 in April, 230 in May) and Montana (94 in April, 119 in May).
They report 5,338 permits were issued in April and 5,385 in May.
“The filing for the permit is usually one of the last steps taken before drilling commences,” Crandell says. “Before the permit is filed for, companies incur significant expenses, including land costs, legal fees, and geological expenses, and, at the time, much of the infrastructure is in place. Thus, most permits that are filed for are drilled.”
He adds that because of the increase in permits issued in May, “we believe this finding supports our view that the rig count will move significantly higher over the coming months.”
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