With West Texas Intermediate crude oil prices charging toward $70/bbl, concerns are overblown that the U.S. rig count will slow, according to Evercore ISI.

To determine the direction of U.S. activity on land and offshore, Evercore’s team each month reviews all major state and federal permits that are filed by exploration and production (E&P) companies to drill new wells or to bypass/sidetrack existing wells. Most onshore permits are issued several months before drilling begins, while offshore permits are often secured even further in advance.

For the first five days of the month, U.S. land permitting stood at 858. The four-week rolling average of 836 was down from the multi-year high in mid-December, but that was attributed to the holiday slowdown. Meanwhile, Texas permitting rose 268% through Jan. 5 week/week, the highest in the country.

The 850-plus permit/week run rate through Jan. 5 implies a total for the full month of nearly 3,500, “which would be the highest January total since 2015,” said Evercore’s James West. Drilling efficiencies already are baked in, which suggests “robust spudding trends in the early part of the year, driven by both dedicated drilling programs from the prominent E&Ps and also one-off spot work from opportunistic private equity (PE).”

Evercore isn’t revising its year-end 2018 rig count forecast of 980, nor its year-end 2019 prediction of 994. However, continued permitting strength through the early part of this year could skew estimate risks to the upside.

Toward the end of last year, inflation in the oilfield services sector and increasing pad efficiencies pushed drilling programs ahead of an undersupplied completions subsector, according to West. Operators were forced in part to reduce their rig counts and instead turned their focus to the plethora of drilled-but-uncompleted (DUC) wells.

The DUC count now stands at about 7,500, mostly in the Permian Basin. For context, if every U.S. rig stopped working immediately, the active pressure pumping fleet would have one-to-two quarters of fracture demand, according to Evercore.

That figure could give some investors pause on concerns that E&Ps may reduce new drilling programs to work through the DUCs.

However, Evercore plotted the four-week permit average against the four-week rig count average and found that a temporary drilling slowdown yielded a “fairly wide disassociation” between “drilling intentions” and active rigs.

“We surmise, then, that the rig count is due to catch up to permit volumes as operators continue to finalize their drilling budgets and PE-backed independents rush to prove out acreage at current commodity prices,” said West.

Last year’s U.S. land permitting eclipsed 2016 and 2015 permit levels. Domestic land permits in December totaled 4,945, 25% higher than in November and up 79% year/year.

For the full year, 2017 was 62% higher than in 2016. Texas and Oklahoma permitting each gained 48%, while North Dakota permitting rose 46% and Louisiana was 13% higher.

Permitting in December fell month/month in Pennsylvania (down 3%) and West Virginia (down 42%), which pressured Appalachia. However, California permits rose 71% from November, while Oklahoma was up 67%.

Overall, Texas continues to be the barometer for land permits and drilling, West said.

“Texas permitting exhibited a 13% sequential increase on the back of a 2% increase the month before; with over half of the working U.S. oil rigs, Texas continues to be the single-most important state in terms of evaluating the magnitude and direction of U.S. permitting trends,” he said.

Meanwhile, Gulf of Mexico permitting showed momentum through the end of 2017. Planning “remains muted,” though. There were 14 new permits in December, up from 12 in November and 27% higher year/year.

“The sharpest decline from the 2014 peak has come from shallow water permitting, down 71% in 2017 from year-to-date 2014,” West said. “We believe that offshore drilling (and specifically jackup utilization) is starting to turn the corner, but continued attrition/consolidation will be critical in supporting slowly-improving permit and drilling activity.”