Oil producers, optimistic that higher crude prices are here to stay, have issued 2017 budgets that call for dramatically greater spending to tap new wells.
Preliminary capital-spending plans released in recent weeks by more than a dozen American shale drillers, including Hess Corp. and Noble Energy Inc., show an average 60% budget increase for the group.
The trend comes after two years of austere budget cuts and layoffs at shale companies to help them cope with a protracted oil bust. The price of U.S. crude started to collapse in 2014 from over $100 a barrel to below $30 in early 2016, prompting drillers to idle rigs and lay off more than 150,000 workers in the U.S.
Wall Street darling RSP Permian Inc., which drills exclusively in West Texas, is boosting this year’s budget by 97% to $600 million.
Last week, Hess, one of the biggest drillers in North Dakota, unveiled a $2.25 billion budget for 2017, an 18% increase over the $1.9 billion it spent last year. The company will spend a significant amount putting more rigs back to work in the Bakken formation.
Noble has said it would spend up to $2.5 billion this year, a potential 67% jump over last year’s $1.5 billion budget, as it doubles its rig activity from Texas to Colorado.
Several U.S. oil producers, including Pioneer Natural Resources Co. and EOG Resources Inc., have said that advanced technology and efficiency gains implemented during the oil-price downturn will allow them to not just survive but thrive at $55 a barrel.
There are already signs of increased U.S. oil activity. The number of oil and gas rigs drilling from Colorado to Oklahoma has been on the rise, reaching 670 working onshore as of Friday, up from a low of 380 in May. The past week’s gain of 36 marked is the biggest one-week surge in land rigs since 2011.
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