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U.S. Gains Two NatGas, Three Oil Rigs Ahead of Holiday

The U.S. active rig count rose by five from a week earlier in the short holiday week ending Wednesday, with three rigs raised for oil and two for natural gas -- all horizontals -- bringing the domestic count to 593, Baker Hughes Inc. said. Canada lost 10 rigs for the week, and its total count stood at 174.

The North American total rig count was down by five overall for the three-day week to 767 from 772 a week ago, and it declined from 928 in the year-ago period. The five-year average is 2,020.

On the U.S. side, the rig count for the week ending Wednesday was down 151 from the same period a year ago. The natural gas rig count stood at 118, off 71 (38%), while the oil rig count fell 81 from a year ago to 474 on the week, off 15%.

Horizontals were the rig of choice, with 475 running in the United States, versus 470 a week ago. The U.S. rig count as of Wednesday also included 52 directional rigs and 66 vertical rigs.

Canada overall lost 10 rigs week/week and settled at 174, which is 10 fewer from the same period of 2015, Baker Hughes said. There were 94 oil rigs running in Canada as of Wednesday, versus 100 a year ago, with 78 gas rigs running, down from 84. Canada's five-year rig count average is 372.

In a note earlier this month about how many U.S. drilling permits had been issued through October, Evercore ISI senior analyst James West said permitting had fallen off from a September high, but it was still well above the 2016 average.

"U.S. land permits totaled 2,501 in October, down 12% from 2,845 in September. October exhibited the third highest monthly permit total this year, but was 44% below year-ago levels, as the U.S did not experience the same seasonal uptick observed in previous years..." October usually benefits from operators accelerating permit filing to work through drilling budgets in the fourth quarter.

Year-to-date through October, land permitting was down 42% from the same period of 2015 and 48% from 2009, when drilling was in a slide from the 2008 peak.

"Relatively strong permit numbers in Ohio (plus-59%), Virginia (plus-100%), and Colorado (plus-3%) bolstered October U.S. land totals, offset by modest declines in Louisiana and Oklahoma (each down 25%)," West said. "Texas permitting has remained resilient relative to the land total, down just 2% sequentially."

Texas, led by the Permian Basin and complemented by the Eagle Ford Shale, Gulf Coast and Haynesville Shale development, "continues to be the single-most important state in terms of evaluating the magnitude and direction of U.S. permitting trends, although permitting also exhibited strong growth in the Rockies, Gulf Coast and Northeast," West said. "Drilling interest also is spreading well beyond the core acreage."

According to Evercore, Texas District 8A, which includes the Permian's Delaware sub-basin, has seen its July-October permit totals jump 58% from the same period of 2015. Nearly every Texas oil basin was within 20% of year-ago July-October permit levels as liquid-rich activity increases.

Meanwhile, Wyoming permitting in the Niobrara formation between July and October rose an unprecedented 34% above the 10-year state average as producers use enhanced drilling to unlock the basin, which is third in line in permitting behind the Permian and Oklahoma's myriad stacked reservoirs.

In addition, Gulf of Mexico permitting increased in October for the third straight month and climbed 60% sequentially from September.

In more positive news for development, the first week of November set a year-to-date weekly high of 763 permits, according to Evercore. "November is on pace to eclipse the 2016 monthly high set in September."

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