U.S. energy companies have reduced the number of natural gas and oil rigs for the second week in succession. The rig count is an indicator of future output, but it has been slowing to grow. Oil production will only recover from pandemic-related reductions next year.
According to Baker Hughes Co’s closely watched report, the U.S. oil-and-gas rig count dropped by one to 763 during the week ending Aug. 12.
This was the first consecutive week of a slashed rig count since August 2020.
Baker Hughes stated that this brings the total count to 263 rigs or 53% more than last year.
U.S. driller’s oil rig count falls by the most since September
U.S. oil production rose by three to 601 this week, while U.S. gas production fell one to 160.
According to federal energy data, U.S. crude oil production was expected to increase from 11.3 million barrels per daily (bpd), in 2021, to 11.9million bpd by 2022 and 12.7million bpd by 2023. This compares to a record 12.3million bpd in 2019.
The total number of rigs has increased for 24 consecutive months through July. However, weekly increases have remained in the single digits. Many companies are more focused on paying down debt and returning money to investors than increasing output.
Morgan Stanley analysts stated in a note that recent capital expenditure increases were “largely associated with inflation and not linked to increased activity.”
Oil prices are up 22% this year, after rising 55% in 2021. There is pressure from the government for more production. A growing number of energy companies have stated 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 4% in 2021 versus 2010.
This is due to a decrease in capital expenditures of approximately 48% in 2020, and 12% in 2019, respectively.
