February 9, 2018 / 9:58 PM / in a month

Texas drilling permits, completions rise as crude prices firm

HOUSTON (Reuters) - Texas oil and gas producers received 1,166 drilling permits last month, a 21 percent increase over year-ago levels, the state energy regulator said on Friday, after filings surged on the back of higher crude prices.

Nearly half of January’s permits were issued for the Midland area of West Texas, home to the Permian Basin oilfield. Shale producers have flocked to the Permian because of its prolific resources and relatively cheap production cost.

Benchmark U.S. crude traded above $60 a barrel last month, a level that encouraged increased drilling. There were 478 rigs operating in Texas as of Feb. 9, versus 361 a year ago, according to data from General Electric’s Baker Hughes.

Well completions rose by 79 percent from a year ago to 963, the Railroad Commission of Texas said. The spike in completions, the final step before production can begin, comes as producers are working through a growing backlog of drilled-but-uncompleted wells, known as DUCs.

Although the rate of well completions in Texas is on the rise, the number of DUCs in the state also continued to climb, an indication that producers are still drilling wells faster than they can be completed.

As of December, there were some 2,777 DUCs in the Permian Basin, up 137 from the prior month and a 119 percent increase from a year ago. In total, there were 7,493 DUCs in the United States, up 37 percent in a year, according to data from the U.S. Energy Information Administration.

Researchers at investment bank Tudor, Pickering, Holt & Co estimate that producers will require an additional four to five million of hydraulic horse power to meet demand for fracking services this year.

Fracking service companies such as Keane Group and Liberty Oilfield Services are expanding hydraulic fracturing fleets, but the market will remain tight this year, likely encouraging higher prices, the firm wrote in a note on Wednesday.

“Frac spread orders are indeed heating up but they do not close the demand/supply gap in our view,” researchers wrote in the note.

Reporting by Liz Hampton; Editing by Tom Brown

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