New U.S. oil and gas well November permits tumble nearly 40 percent

Plunging oil prices sparked a drop of almost 40 percent in new well permits issued across the United States in November, in a sudden pause in the growth of the U.S. shale oil and gas boom that started around 2007.

Data provided exclusively to Reuters on Tuesday by industry data firm Drilling Info showed 4,520 new well permits were approved last month, down from 7,227 in October.

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The pullback was a "very quick response" to U.S. crude prices, which settled on Tuesday at $66.88 CLc1, said Allen Gilmer, chief executive officer of Drilling Info.

Fracking equipment in Colorado
R.J. Sangosti | The Denver Post | Getty Images

New permits, which indicate what drilling rigs will be doing 60-90 days in the future, showed steep declines for the first time this year across the top three U.S. onshore fields: the Permian Basin and Eagle Ford in Texas and North Dakota's Bakken shale.

The Permian Basin in West Texas and New Mexico showed a 38 percent decline in new oil and gas well permits last month, while the Eagle Ford and Bakken permit counts fell 28 percent and 29 percent, respectively, the data showed.

That slide came in the same month U.S. crude oil futures fell 17 percent to $66.17 on Nov. 28 from $80.54 on Oct. 31. Prices are down about 40 percent since June.

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U.S. prices fell below $70 a barrel last week after the Organization of Petroleum Exporting Countries agreed to maintain output of 30 million barrels per day. Analysts said the cartel is trying to squeeze U.S. shale oil producers out of the market.

Total U.S. production reached an average of 8.9 million barrels per day in October, and is expected to surpass 9 million bpd in December, the highest in decades, according to the U.S. Energy Information Administration.

Gilmer said last month's pullback in permits was more about holding off on drilling good locations in a low-price environment than breaking even on well economics.

"I think in this case this was just a quick response, saying 'there are enough drill sites in the inventory, let's sit back, take a look and see what happens with prices,'" he said.

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In addition to the Permian, Eagle Ford and Bakken, about 10 other regions tracked in Drilling Info's data showed declines as well. The Niobrara shale in Colorado and Wyoming saw a 32 percent decline in new permits, while the Granite Wash in Oklahoma and Texas and Mississippian Lime in Oklahoma and Kansas retreated 30 percent and 27 percent, respectively.

Gilmer said the pullback in new permits is a precursor to a decline in rigs. The U.S. land rig count has been largely flat since September, hovering around 1,860 oil and gas rigs, according to Baker Hughes.

"This will show up," he said. "I expect we'll start seeing rig impact in a couple of months."

Share prices of drillers including Patterson UTI Energy, Helmerich & Payne and Nabors were slightly lower on Tuesday.