U.S. oil drillers cut rigs this week for the first time since June, ending a 17-week recovery in the rig count, even as crude prices mostly held over $50 per barrel (bbl) in October, the key level analysts said should lead to more drilling.
Drillers cut two oil rigs in the week to Oct. 28, bringing the total rig count down to 441, compared with 578 rigs seen one year ago, according to energy services firm Baker Hughes Inc. on Oct. 28. That ended the longest streak of not cutting oil rigs since 2011, started after crude briefly climbed over $50/bbl in May and June and held at that level for most of October. During those 17 weeks, drillers added 113 rigs.
The oil rig count plunged from a record 1,609 in October 2014 to a six-year low of 316 in May after crude prices collapsed from more than $107/bbl in June 2014 to near $26/bbl in February 2016 due to the global oil glut.
U.S. crude futures traded at about $50/bbl during much of the week of Oct. 24, but slipped below that level and were set to decline for the first week in six on doubts about whether global producers will agree on an ouput cut big enough to curb the glut that has weighed on the market for two years.
But with oil prices still expected to rise in 2017 and 2018 with a projected tightening of the supply-demand balance, analysts forecast energy firms will follow through on plans to boost spending on new drilling in coming years. Futures were trading near $52/bbl for calendar 2017 and near $54/bbl for calendar 2018.
During the week of Oct. 24, analysts at Cowen & Co. said in a note that the firm's tracking of capex indicated nine E&P companies, including Cabot Oil and Gas Corp. (NYSE: COG) and Devon Energy Corp. (NYSE: DVN), planned to increase spending by an average of 42% in 2017 over 2016.
Cowen tracks 65 E&Ps, and said the forecast 2017 increase followed an estimated 43% decline in 2016 spending, below 2015 levels, for all 65.
Since most wells produce both oil and natural gas, Cowen forecast that increased spending in 2017 would boost average oil and gas rig counts to 634 in 2017 and 732 in 2018. In 2016, there were 514. That compares with an average of 978 oil and gas rigs active in 2015, according to Baker Hughes data.
Recommended Reading
Deep Well Services, CNX Launch JV AutoSep Technologies
2024-04-25 - AutoSep Technologies, a joint venture between Deep Well Services and CNX Resources, will provide automated conventional flowback operations to the oil and gas industry.
EQT Sees Clear Path to $5B in Potential Divestments
2024-04-24 - EQT Corp. executives said that an April deal with Equinor has been a catalyst for talks with potential buyers as the company looks to shed debt for its Equitrans Midstream acquisition.
Matador Hoards Dry Powder for Potential M&A, Adds Delaware Acreage
2024-04-24 - Delaware-focused E&P Matador Resources is growing oil production, expanding midstream capacity, keeping debt low and hunting for M&A opportunities.
TotalEnergies, Vanguard Renewables Form RNG JV in US
2024-04-24 - Total Energies and Vanguard Renewable’s equally owned joint venture initially aims to advance 10 RNG projects into construction during the next 12 months.
Ithaca Energy to Buy Eni's UK Assets in $938MM North Sea Deal
2024-04-23 - Eni, one of Italy's biggest energy companies, will transfer its U.K. business in exchange for 38.5% of Ithaca's share capital, while the existing Ithaca Energy shareholders will own the remaining 61.5% of the combined group.