U.S. energy companies added oil rigs for a second week in a row, following through on plans to spend more on drilling this year with crude prices at three-year highs, Baker Hughes, a GE company (NYSE: BHGE) said April 13.
Drillers added seven oil rigs in the week to April 13, bringing the total to 815, the highest since March 2015, BHGE said in its weekly report. More than half the total oil rigs are in the Permian Basin in West Texas and eastern New Mexico. Active units there increased by one this week to 445, the most since January 2015.
The U.S. government expects oil output in the Permian to rise to a record high near 3.2 million barrels per day (MMbbl/d) in April, about 30% of total U.S. oil production.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 683 rigs were active. Energy companies have steadily hiked spending since mid-2016 as crude prices have recovered from a two-year slump.
U.S. crude futures traded at about $67 per barrel this week, their highest since December 2014. Looking ahead, crude futures were trading around $66 for the balance of 2018 and $61 for calendar 2019.
In anticipation of higher prices, U.S. financial services firm Cowen & Co. said 58 of the roughly 65 E&P companies it tracks have already indicated an 11% increase this year in planned capital spending.
Cowen said E&Ps that have reported capital plans for 2018 expected to spend a total of $80.5 billion in 2018, up from an estimated $72.4 billion in 2017.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast the total oil and natural gas rig count would average 1,013 in 2018 and 1,129 in 2019, the same as last week.
So far this year, the total number of oil and natural gas rigs active in the U.S. has averaged 972, up sharply from an average of 876 rigs in 2017 and 509 in 2016, and not far from the total of 978 in 2015. Most rigs produce both oil and gas.
The U.S. Energy Information Administration this month projected average annual U.S. production will rise to a record high 10.7 MMbbl/d in 2018 and 11.4 MMbbl/d in 2019 from 9.3 MMbbl/d in 2017.
The current all-time U.S. annual output peak was in 1970 at 9.6 MMbbl/d, according to federal energy data.