U.S. energy firms this week added oil and natural gas rigs for the ninth time in 10 weeks after Russia's invasion of Ukraine drove crude prices to their highest since 2008.
The oil and gas rig count, an early indicator of future output, rose 13 to 663 in the week to March 11, its highest since April 2020, energy services firm Baker Hughes Co. said in its closely followed report.
Baker Hughes said that puts the total rig count up 261 rigs, or 65%, over this time last year.
U.S. oil rigs rose eight to 527 this week, their highest since April 2020, while gas rigs gained rose five to 135, their highest since October 2019.
U.S. crude futures traded over $130/bbl this week, their highest since July 2008 as Russia’s Feb. 24 invasion of Ukraine stoked global energy supply concerns.
While high prices should boost profits, producers fear expensive oil could also sap demand, and huge new investments in drilling will produce oil only after the crisis has passed.
“What we don't want to do as a company, and I don’t think anyone in the industry wants to do, is try to chase prices up in the short term and have that run-up be ultimately ineffective,” Chesapeake CEO Domenic Dell’Osso said in an interview at CERAWeek conference this week.
RELATED:
Pioneer, ConocoPhillips, Chesapeake Execs Eye Single-digit Growth in US Shale
Even though the rig count has climbed for a record 19 months in a row, the weekly increases have mostly been in single digits and oil production is still far from pre-pandemic record levels as many companies focus more on returning money to investors rather than boosting output.
“Rig activity across the five largest U.S. oil plays would need to increase by about three every week over the next eight weeks to reach a sustainable plateau to hold current oil volumes in 2022,” analysts at Mizuho, a bank, said in a report.
U.S. crude production was on track to rise from 11.2 million bbl/d in 2021 to 12 million bbl/d in 2022 and 13 million bbl/d in 2023, according to federal energy data. That compares with a record 12.3 million bbl/d in 2019.
With oil prices up about 44% so far this year after soaring 55% in 2021, a growing number of energy firms said they plan to boost spending for a second year in a row in 2022 after cutting drilling and completion expenditures in 2019 and 2020.
However, shale producers are unlikely to replace banned Russian oil imports due to a shortage of oilfield materials, equipment and labor and a dwindling backlog of wells waiting to be completed, energy executives and analysts said at CERAWeek.
Recommended Reading
Pembina Pipeline Enters Ethane-Supply Agreement, Slow Walks LNG Project
2024-02-26 - Canadian midstream company Pembina Pipeline also said it would hold off on new LNG terminal decision in a fourth quarter earnings call.
Energy Transfer Asks FERC to Weigh in on Williams Gas Project
2024-04-08 - Energy Transfer's filing continues the dispute over Williams’ development of the Louisiana Energy Gateway.
Canada’s First FLNG Project Gets Underway
2024-04-12 - Black & Veatch and Samsung Heavy Industries have been given notice to proceed with a floating LNG facility near Kitimat, British Columbia, Canada.
Venture Global Acquires Nine LNG-powered Vessels
2024-03-18 - Venture Global plans to deliver the vessels, which are currently under construction in South Korea, starting later this year.
Targa Expects Another Major Permian Pipeline Project This Year
2024-05-03 - Targa Resources says different projects are falling in place for gas capacity expansion