Rig count down as energy firms complete wells, rather than drill new ones
HOUSTON (Reuters) – In its weekly rig count analysis, oil services company Baker Hughes reports U.S. oil drillers cut rigs for an eighth week in a row to the lowest level since October 2009, even with futures at six-month highs as some energy firms focus on completing wells rather than drilling new ones.
Drillers cut 10 oil rigs in the week to May 13, bringing the total rig count down to 318, Baker Hughes said in its closely followed report.
The number of U.S. oil rigs currently operating compares with the 660 rigs operating in the same week a year ago. In 2015, drillers cut on average 18 oil rigs per week for a total of 963 for the year, the biggest annual decline since at least 1988 amid the biggest rout in crude prices in a generation.
Energy firms have sharply reduced oil and gas drilling since the collapse in crude markets began in mid-2014 as U.S. crude futures fell from over $107 a barrel to hit a near 13-year low at around $26 in February. But with U.S. crude futures reaching a six-month high around $47 a barrel earlier this week, some analysts forecast rig counts will stop declining soon and rise later this year as prices increase in coming months.
U.S. crude futures were fetching nearly $48 for the balance of 2016 and over $49 for calendar 2017. Analysts at Cowen & Co, a U.S. financial services firm, expects U.S. oil and natural gas land rigs to bottom near current levels between 375 and 400 before increasing in the fourth quarter.
There were 391 land rigs in the week ended May 6, according to Baker Hughes. In fact, Cowen said in its rig count forecast this week that land rigs increased by seven in the week ended May 11, the first weekly rise in land rigs in its forecast since December.
Land rigs have not gained in the Baker Hughes survey since August.
Still some companies plan to focus more on completing drilled but uncompleted (DUC) wells than drilling new ones. Oasis Petroleum Inc, an independent U.S. oil and gas producer, said this week it planned to spend more to complete DUCs than on new drilling over the next few quarters. Oasis said it was likely start thinking about increasing its drilling activity when prices reach the $50 to $60 range, joining several other producers in the shale basins, like Pioneer Natural Resources Co and Hess Corp which have said the same.
In Canada, there was an uptick in the number of rigs operating with 16 oil rigs and 26 gas rigs in play. Those numbers are drastically lower than the rig count at this time last year when there were 21 oil rigs and 56 gas rigs up and running.
(Reporting by Scott DiSavino; Editing by Marguerita Choy)