February 11, 2015 / 7:04 PM / 5 years ago

New U.S. well permits fall 24 pct in January -DrillingInfo

HOUSTON, Feb 11 (Reuters) - New oil and gas well permits issued across the United States fell 24 percent in January, as crude producers slashed budgets and focused on high-output areas with oil prices down by more than half from last summer’s triple-digit highs.

Permit counts released on Wednesday by data and analytics firm DrillingInfo showed that 3,586 new oil and gas well permits were issued last month, down from 4,749 in December.

Ralph Alexander, managing director of energy private investment firm Riverstone Holdings LLC, said on Wednesday as DrillingInfo unveiled a new index featuring data points on oil patch activity that producers bypass marginal wells to focus on those with higher output.

“You focus on the best areas. Get better wells at lower cost. It sounds simple - everybody’s doing it,” he said.

DrillingInfo Chief Executive Allen Gilmer said the index is intended to provide more information about production trends beyond ups and downs of rig counts. {ID:nEMNF240SO] During the 1980s, oil activity was largely one vertical well per rig, so declining rig counts easily illustrated lower output.

Now one rig can drill multiple wells, or one drills vertically while another bores horizontally and taps more oil, he said. The index examines actual wells drilled and where.

A map shows wells drilled in January focused on the most productive areas of the Eagle Ford, as well as the bigger Permian Basin in West Texas and New Mexico, the Bakken shale in northwest North Dakota, and some areas in northern Oklahoma and northeast Colorado.

The same map also shows wells drilled in the last six months, although much fewer in January, in more marginal areas in north and east Texas, Louisiana, Mississippi, Kansas and Wyoming.

Gilmer said that while new wells started or drilled fell about 15 percent to 1,888 in January, compared with December, the producibility of those wells - or expected output given their locations - fell 7 percent.

“So it’s not linear. That 15 percent drop in the number of wells drilled isn’t going to yield a 15 percent drop in producibility. It’s going to yield essentially half of that over time,” he said.

The U.S. Energy Information Administration said on Tuesday that total U.S. oil production averaged 9.2 million bpd last month, with growth forecast to reach 9.3 million bpd this year.

Reporting By Kristen Hays; editing by Gunna Dickson

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