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Permian Adds Six Rigs, But U.S. Count Falls on Oil Declines

Gains in the Permian Basin weren't enough to offset the ongoing pullback in the U.S. rig count for the week ended Friday, and the United States finished down one to 935, according to data compiled by Baker Hughes Inc. (BHI).

A gain of four natural gas-directed rigs in the United States for the week couldn't make up for five oil rigs that left the patch. Five horizontal rigs packed up as three directional rigs and one vertical rig returned.

Canada fared better, adding 10 oil-directed rigs while dropping two gas-directed units to finish at 220.

That left the combined North American rig count at 1,155 rigs, up seven week/week and far surpassing the 649 rigs running in the year-ago period.

The broader declines in U.S. oil drilling for the week didn't phase the Permian Basin, which was the biggest mover among plays, according to BHI's breakdown. The West Texas and southeastern New Mexico play added six rigs to finish at 386 versus 201 a year ago.

But the gains in the Permian came as the Eagle Ford Shale -- faced with production impacts from last month's Hurricane Harvey -- and North Dakota's Williston Basin each saw three rigs pack up shop for the week. The Eagle Ford stood at 68 rigs as of Friday, with the Williston at 49 active rigs, according to BHI.

The Denver Julesburg-Niobrara formation in Colorado saw two rigs dropped for the week to end at 26, while the Cana Woodford (63 rigs) and Granite Wash (14 rigs) each ended the week down one rig.

Among the states, Louisiana added three rigs to finish at 65, but those rigs didn't go to work in the Haynesville Shale, which dropped a rig and stood at 45, according to BHI.

The weekly gains in the Permian -- amid declines most everywhere else -- come as the play continues to attract capital from producers and midstreamers. Halcon Resources Corp. announced it is selling its remaining nonoperated assets in the Williston Basin as it transitions to a Permian pure-play. Oryx Midstream Services II LLC said it plans to build a 220-mile crude oil transportation pipeline in the Permian's Delaware sub-basin.

Meanwhile, as exploration and production companies aggressively develop the Permian, geological constraints could arise and lead to production shortfalls and potentially higher prices early in the next decade, according to an analysis by Wood Mackenzie.

"Fully modeling the potential impact of the latest breakthrough technologies reveals measurable upside to Permian peak production," said consultants. "However, downside risks related to tighter well spacing and well-on-well interference, could bring peak Permian production forward by four years compared to the upside case, putting more than 1.5 million b/d of future production in question."

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