U.S. oil firms have cut their number of oil drilling rigs by more than 80% since September. This is because production increases incrementally and energy firms are increasing shareholder returns while facing higher operating costs and inflationary pressures.
In its closely watched report Friday, Baker Hughes Co, an energy services company, stated that the number of oil rigs, a key indicator of future output, dropped seven to 598 for the week ending Aug. 5. This is the first weekly drop in 10 weeks.
The gas rigs increased four times to 161, which is their highest level since August 2019. However, the combined oil-gas fell three to 764. This brings the total number of rigs up to 273, or 56%, Baker Hughes stated.
The total number of rigs has increased for a record 24 months through July. However, weekly increases have mainly been in the single digits. Oil production is expected to only recover to pre-pandemic levels next year.
ConocoPhillips stated that its full-year oil and gas production could increase at a low single-digit percentage rate compared to last year. The largest independent oil producer in the United States raised its target for shareholder payouts by 50% this week, beating Wall Street’s earnings estimates due to rising energy prices.
U.S. shale producers Chesapeake Energy Corp. Pioneer Natural Resources Co. and Coterra Energy Inc also reported strong second-quarter profits this week. They increased shareholder returns by increasing dividends and buying back shares.
However, with oil prices rising by 19% this year after climbing 55% in 2021, and the government putting pressure to produce more, a growing number of energy companies said that they will increase spending in 2022 for the second consecutive year. This follows a reduction in drilling and completion costs in 2019 and 2020.
Cowen & Co, a U.S. financial service firm, stated that the independent exploration-production (E&P), companies it tracks have plans to increase spending by 35% in 2022 versus 20,21 after increasing spending by approximately 4% in 2021 versus 2010.
This is due to a decrease in capital expenditures of approximately 48% in 2020, and 12% in 2019, respectively.
