Focus on top spots to boost US oil output even as well permits fall

Fri Dec 5, 2014 1:00am EST
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By Ernest Scheyder and Kristen Hays

WILLISTON, N.D./HOUSTON Dec 5 (Reuters) - U.S. energy firms are swiftly shifting drilling rigs away from less productive areas and hunkering down in sweet spots of North Dakota and Texas shale oil fields as they try to lift output and cut costs in response to the toughest crude market in years.

Rig deployments or applications for new well permits fell by half in recent months in parts of North Dakota's Bakken formation and the Eagle Ford and Permian Basin in Texas, but the most prolific areas are holding up, according to officials and data from the two top crude-producing states.

The numbers show how big companies such as Apache Corp and Continental Resources Inc. are already implementing plans to focus on the juiciest parts of shale fields. They say the strategy will produce double-digit output growth next year even as they trim rigs.

Overall, new well permits granted nationwide tumbled 40 percent in November according to data firm Drilling Info.

Investment bank Simmons & Co forecast this week the U.S. onshore rig count would fall by 500 through next year from 1,851 now, a 27 percent slump.

In the past, such declines would have led to an inevitable drop in output.

Today, improving technology helps get more oil out of fewer wells and with drilling contracts already signed for the next six months, U.S. output is widely expected to rise.

"You're upping your capital in your best plays, reducing it in your worst plays," says Vikas Dwivedi, global oil and gas strategist at the investment bank Macquarie, who predicts a further rise in U.S. oil output.   Continued...