API: US natural gas drilling breaks record in 2007

Nick Snow
Washington Editor

WASHINGTON, DC, Jan. 25 -- US oil and gas exploration and production activity remained robust during 2007 as producers drilled a record number of natural gas wells, the American Petroleum Institute said.

Oil well completion activity was the most active since 1990, while total estimated footage was the highest in two decades, API said Jan. 24 in its latest quarterly well completion report.

An estimated 52,731 oil wells, gas wells, and dry holes were completed domestically in 2007, according to API. The fourth quarter's estimated 13,737 completions were the highest since 1986's first quarter, it added.

Natural gas continued to dominate as an estimated 30,625 wells were drilled during the year, with 7,785 of them sunk during the fourth quarter. US gas drilling reached a quarterly peak during 2007's final quarter, API noted.

A resurgence in oil well completion activity, which began in 2000, continued in 2007 as an estimated 17,223 wells were drilled, API reported. Exploratory gas well estimates rose for a fifth consecutive year to a record 3,613, while the estimated 981 exploratory oil well total was comparable to 1986, the report said.

Total footage for the year, which API said was the highest in two decades, was about 306,424,000 ft, with 77,812,000 ft drilled during the fourth quarter, it indicated.

Oil's share grew
The report was similar to others which showed gas continuing to be the primary driving force in domestic exploration and production. But there also were signs that oil's share of total activity grew during the year.

The total number of rigs working in the US during 2007 averaged 1,768/week, according to Baker Hughes Inc. Gas accounted for more than 80% of the total through the year, but oil's share grew from 16% during January, or an average 269.5 wells/week, to 19% during December, or an average 337.5 wells/week. Gas drilling grew more modestly from an average 1,440.25 wells/week during January to 1,468 wells/week during December.

Prices may be having an influence. Oil prices pushed to near $100/bbl in early January, driven by: the Organization of Petroleum Exporting Countries' decision to maintain current production; geopolitical issues in Iran, Nigeria, and Pakistan; and by a sharp decline in US inventories, the Federal Reserve Bank of Dallas said in its January 2008 Houston Economic Update.

Meanwhile natural gas prices remained in the $7-8/Mcf range as they felt downward pressure from moderate winter weather and inventories that are about 10% above normal for mid-winter. They were supported, however, by sharply rising oil prices, the Dallas Fed said.

"Domestic drilling held steady near 1,800 working rigs [during 2007], but the Texas rig count jumped sharply, once again led by work in the Barnett shale near Fort Worth. Expectations are for drilling to decline in Canada in 2008 and remain steady or pick up in the US and for lucrative international work to continue to grow," it indicated.

It said that pricing for drilling and other oil field services remains mixed, depending on the line of business, on domestic weakness versus international strength, and on declines in pricing for some drilling durable goods vs. better pricing for some nondurable products. "Overall, price pressures in oil services have eased significantly since last spring," the Dallas Fed report noted.

Contact Nick Snow at nicks@pennwell.com.

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