Baker Hughes Co a prominent energy services firm, reported that U.S. energy companies experienced the largest weekly reduction in oil and natural gas rigs since February, according to its widely monitored report released on Friday.
In the week leading up to May 5, the oil and gas rig count, which serves as an early predictor of future production, dropped by seven to 748.
Even with the decline in rigs this week, Baker Hughes noted that the overall count remains 43 rigs, or 6%, higher compared to the same period last year.
This week, oil rigs experienced their largest weekly decrease since March, dropping by three to 588. Gas rigs also saw their most significant decline since February, falling by four to 157.
So far this year, U.S. oil futures have dipped approximately 11% after witnessing a 7% increase in 2022. U.S. gas futures, on the other hand, have plummeted about 52% this year following a 20% rise last year.
The decline in gas prices contributed to the reduction of active rigs in the Haynesville basin, spanning Arkansas, Louisiana, and Texas. As the nation’s third-largest shale gas field, its rig count dropped to 62 this week, marking the lowest point since March 2022, according to Baker Hughes.
In the first two months of 2023, U.S. oil and gas production witnessed rapid growth, as a result of the high prices and increased drilling activity in the previous year, largely driven by Russia’s invasion of Ukraine.
However, growth is expected to slow down significantly, as the recent dip in prices discourages new drilling and well completions, with effects becoming apparent by the fourth quarter of 2023.
This week, Chesapeake Energy Corp (CHK.O), EOG Resources (EOG.N), and APA Corp (APA.O) stated that they might postpone well completions or reduce drilling due to weak prices.
Conversely, shale producer Diamondback Energy (FANG.O) highlighted that rig prices are decreasing, and steel costs are anticipated to drop by around $20-$25 per foot, indicating that the inflationary pressures that burdened the oilfield industry last year are subsiding.
