Baker Hughes: U.S. oil & gas rig count falls to lowest since late July

U.S. energy companies have reduced the number of natural gas and oil rigs in operation to the lowest level since late July. This is due to a slowdown in rig count growth and lower production despite high energy prices.

In its closely watched report, Baker Hughes Co, an energy services firm, stated that the U.S. oil-and-gas rig count, which is an indicator of future output, dropped by one to 759 in the week to Sept 9. This was the fifth consecutive week.

Despite this decline, the number of rigs was still higher by 256 (or 51%) than it was at the same time last year.

U.S. oil and gas rigs declined five to 591 this Week, their lowest level since mid-June. However, they rose four to 166, their highest levels since August 2019.

After rising 55% in 2021 and oil prices increasing by 16% this year, the total rig count dropped in August. This was after it had been up for 24 consecutive months.

However, even though weekly increases are on the rise, they have tended to be in the single digits because many companies place more emphasis on paying down debt and returning money to investors than on boosting production.

Chief executives from EOG Resources and Pioneer Natural Resources, shale oil producers, said that supply chain constraints and inflationary pressures are also causing disappointing oil output gains.

Scott Sheffield, the CEO of Pioneer, a leading shale producer, stated that these limitations will “keep people from drilling too heavily in the Permian,” which is the largest U.S. oilfield and has provided most of America’s recent oil gains.

Sheffield predicted that the U.S. would produce around 500,000 barrels per day (bpd) this fiscal year. Next year’s gains may be lower. He is far below the U.S. Energy Information Administration’s (EIA) projection of 800,000 barrels per day for 2023.

This week, the EIA reduced its 2022 oil production forecast to 11.8million bpd. This is a decrease of 100,000 bpd over the previous forecast. The outlook for 2023 was also reduced by 100,000 bpd to an average of 12.6 million barrels per day.

Schlumberger, a leading oilfield services company, said Wednesday that North American oil and natural gas activity is growing faster than expected. This is due to higher investment rates.

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.

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