U.S. energy firms this week reduced the number of oil rigs operating for a third week in a row as weaker oil prices encourage drillers to follow through on plans to cut spending.
Drillers cut five oil rigs in the week to May 24, bringing the total count down to 797, the lowest since March 2018, General Electric Co.'s Baker Hughes energy services firm said in its closely followed report on Friday.
That compares with 859 rigs operating during the same week a year ago.
The rig count, an early indicator of future output, has declined over the past five months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
Pioneer Natural Resources Co., one of the largest producers in the Permian Basin of West Texas and New Mexico, announced on Tuesday that it had cut about a quarter of its workforce to save costs and boost shareholder value.
U.S. crude futures were trading around $58 per barrel on Friday, putting the contract on track for its biggest weekly drop of the year, due to rising inventories and concern over an economic slowdown.
Looking ahead, crude futures were trading around $58 a barrel for the balance of 2019 and $56 in calendar 2020.
U.S. financial services firm Cowen & Co. this week said that projections from the exploration and production (E&P) companies it tracks point to a 5 percent decline in capital expenditures for drilling and completions in 2019 versus 2018.
Cowen said independent producers expect to spend about 11 percent less in 2019, while major oil companies plan to spend about 16 percent more.
In total, Cowen said all of the E&P companies it tracks that have reported will spend about $81.9 billion in 2019 versus $86.4 billion in 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,027. Most rigs produce both oil and gas.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, however, forecast the average combined oil and gas rig count will slide from a four-year high of 1,032 in 2018 to 1,019 in 2019 before rising to 1,097 in 2020.
That is the same as Simmons predictions since early April.
Recommended Reading
TotalEnergies Entering, OMV Exiting SapuraOMV JV
2024-01-31 - TotalEnergies aims to deepen its presence in Malaysia through the $903 million deal to acquire OMV’s interest in the SapuraOMV Upstream joint venture.
Hess: Pre-emption Provision Doesn't Apply to Buyout Deal With Chevron
2024-02-27 - Hess Corp. said on Feb. 27 that a pre-emption provision does not apply to its proposed $53-billion buyout by Chevron Corp. and it remains "fully committed" to the deal.
EQT, Equitrans Midstream to Combine in $5.5B Deal: Reports
2024-03-11 - EQT Corp.'s deal would reunite the natural gas E&P with Equitrans Midstream after the two companies separated in 2018.
Analysts: Chesapeake-SWN Poised to Supply Growing Global LNG Demand
2024-01-11 - Chesapeake Energy and Southwestern Energy are combining in a $7.4 billion merger to serve more domestic customers and access growing global LNG demand.
Potential Chesapeake, Southwestern Merger May Face Tough Scrutiny
2024-01-09 - Low natural gas prices are driving producers such as Chesapeake and Southwestern to seek large ‘strategic’ deals at a time when large-scale consolidation is coming under increased scrutiny by lawmakers and regulators.