U.S. energy companies added natural gas and oil rigs this week for the ninth consecutive week, data showed Friday. This is because small producers are responding to high prices and government prodding to increase output.
Baker Hughes Co, an energy services company, reported that the oil and gas drilling rig count, which is an indicator of future output, increased from 14 to 728 during the week to May 20. This was its highest level since March 2020. Baker Hughes stated that this brings the total rig count to 273, or 60%, higher than it was at the same time last year.
U.S. oil production rose 13 to 576 this week, its highest level since March 2020. Gas rigs increased from one to 150, their highest point since September 2019.
More than half of U.S. oil rigs are located in Permian Shale in West Texas and eastern New Mexico. Total units increased by eight to 343 this week, the highest increase since April 2020.
The U.S. government has been urging drillers to produce more oil to lower domestic prices and to help allies reduce their dependence on Russia’s energy. The benchmark U.S. crude oil prices have risen by 49% this year.
Although the rig count has increased for 21 months, it has been growing incrementally as publicly-traded producers adhere to their capital discipline. Overall production has remained below the 2019 record of a million barrels per day (bpd).
Many of the recent producers who have begun drilling were small private companies that are quick to react to changes in crude oil prices.
While many publicly traded companies have increased their spending on new drilling, they are still able to return cash to shareholders and reduce debt.
Analysts at Rystad Energy stated this week that private operators will be a major driver because they have quickly reacted to an elevated market, increasing activity, and output.
Rystad stated that private companies have more than doubled the number of rigs in the Permian Basin. This was from 30 to 73 in just over a year between January 2021 and April 2022.
According to government data, the Permian’s oil output is expected to increase 88,000 bpd to a record 5.219 million bpd by June, according to government data.
Rystad predicted that investments in the Permian will rise more than 40% by 2021 levels, to $25.7 billion this year.
The major oil companies Exxon Mobil Corp., Chevron Corp., BP, and ConocoPhillips will be responsible for the increased Permian spending. In 2022, the Exxon Mobil Corp. and Chevron Corp. will rise 60% to $7.4 billion, respectively. In 2022, the privates will increase 50% to almost $9 billion, Rystad stated.
