In bet on oil prices, WPX plans to add Bakken rigs

Thu Jun 25, 2015 2:17pm EDT
 
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By Ernest Scheyder

WILLISTON, N.D., June 25 (Reuters) - Drilling rigs are coming back to North Dakota. WPX Energy Inc, a small oil producer in the No. 2 U.S. crude state, said on Thursday it will add two rigs this year, becoming the first since the crude price downturn to announce concrete steps to boost output.

Though only the 11th-largest North Dakota oil producer, trailing Whiting Petroleum Corp and others, WPX has effectively staked out a leadership position in the state's Bakken shale formation by saying it will add rigs, slash well completion costs and target a 20 percent boost in output by 2016.

Half a dozen other companies in the crowded U.S. shale industry have talked about adding rigs but have so far balked at making definite moves.

Executives say they face a dilemma: they want to drill more to capture a recent upturn in prices, but worry widespread new rig deployments would cause prices to slump again.

The U.S. Energy Information Administration said last month it expected nationwide oil output to fall through September from March levels of about 9.3 million barrels per day, specifically due to a drop in the nationwide rig count.

Some of those fears may be overstated. According to Thomson Reuters Oil Research & Forecasts, if 200 rigs were added through December, the associated new crude supply would erase about $2.44 a barrel from U.S. crude prices this year. U.S. crude traded at $60 a barrel on Thursday.

The U.S. oil rig count, after falling by half in recent months, now stands at 631.

"Were realizing the value we have on this acreage to a fuller extent through technical excellence, improving the way we develop the asset, and looking at the operations through a new lens," WPX Chief Executive Rich Muncrief said in a statement.   Continued...