Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of Englewood, Colorado-based consulting company IHS Inc., said at a conference in New York that “prices in the lower $70s over a period of six months would slow” U.S. oil production.
Photographer: F. Carter Smith/Bloomberg

by Lynn Doan and Jonathan Crawford | Bloomberg

The slowdown in the U.S. oil-drilling boom spread to two of the nation’s largest fields this week.

The Permian Basin of Texas and New Mexico, the country’s biggest oil play, lost four rigs targeting crude, dropping to 558, Baker Hughes Inc. said on its website today. Those in North Dakota’s Williston Basin, the third-largest and home to the Bakken shale formation, slid to the lowest level since August, according to the Houston-based field services company’s website. It was the first time in four weeks that oil rigs dropped in the Williston.

Oil prices have tumbled 29 percent from this year’s peak, pausing a surge in drilling in U.S. shale plays that has propelled domestic crude production to the most in three decades and brought retail gasoline prices below $3 a gallon for the first time since 2010. Drillers from Apache Corp. to Hess Corp. have announced plans to cut their rig counts in some North American oil fields as crude futures trade under $80 a barrel.

“Prices in the lower $70s over a period of six months would slow” U.S. oil production, Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of Englewood, Colorado-based consulting company IHS Inc., said at a conference in New York. “People have leased rigs. They have rented them for the year and so forth. But you’d start to see an impact.”

Big Drops

U.S. benchmark West Texas Intermediate crude for January delivery gained 66 cents to settle at $76.51 a barrel on the New York Mercantile Exchange.

“We’ll start to see really big drops early next year if oil prices stay the same,” James Williams, president of WTRG Economics in London, Arkansas, said by telephone.

Nineteen shale regions in the U.S. are no longer profitable with oil at $75 a barrel, data compiled by Bloomberg New Energy Finance show. Those areas, including parts of the Eaglebine and Eagle Ford in Texas, pumped about 413,000 barrels a day, according to the latest data available from Drillinginfo Inc. and company presentations.

Domestic oil output slipped 59,000 barrels a day in the week ended Nov. 14 to 9 million after reaching the highest level since at least 1983, Energy Information Administration data show.

Hess, based in New York, said in a conference call Nov. 10 that it’ll cut its rig count to 14 next year in response to the lower oil prices. Apache, with headquarters in Houston, will reduce spending in North America by 25 percent next year, a company statement issued yesterday shows.

North Dakota

Rigs in North Dakota may fall below 180 as drillers opt not to renew contracts, Lynn Helms, director of the state’s Mineral Resources Department, said in a conference call last week.

As competitors curb spending for 2015, Encana Corp. said it’ll boost activity as it doubles the number of rigs targeting oil in Texas’s Permian Basin. “This as an environment to accelerate,” Doug Suttles, the company’s chief executive officer, said in a Nov. 17 interview at his Calgary office.

While rig counts have fallen, productivity has surged to record levels across all major fields, with oil output per rig expected to rise to a record 543 barrels a day in the Bakken in December, the EIA said.

Rigs drilling for oil in the Eagle Ford shale formation, the second-biggest field in the U.S., were unchanged at 195, after losing two a week earlier, Baker Hughes said.

Those targeting gas in the U.S. rose by five to 355.

U.S. gas stockpiles dropped 17 billion cubic feet last week to 3.594 trillion, according to the EIA. Supplies were 6.4 percent below the five-year average and 5.3 percent under year-earlier inventories.

Natural gas for December delivery slipped 24.4 cents to $4.245 per million British thermal units on the Nymex.