U.S. energy companies added oil and natural gas drilling rigs this week as oil prices rose to an almost seven-year high. This prompted some drillers to return back to the wellpad.
In its closely watched report, Baker Hughes Co (BKR.N.) said that the oil and gas rig count, which is an indicator of future output, rose six per cent to 556 in a week to Nov. 12. This was its highest level since April 2020.
This brings the total number of rigs to 244, or 78%, more than last year.
U.S. oil production rose to 454 and gas rigs rose to 102 this week. This is their highest level since April 2020.
U.S. crude oil futures rose to near their highest prices since 2014. They were trading at $81 per barrel on Friday.
Some energy companies said that they will increase spending in 2021 or 2022, despite oil prices rising by 67% this year. This is after cutting drilling and completion costs in 2019 and 2020.
However, this spending increase is still small because most companies continue to concentrate on increasing cash flow, decreasing debt, and increasing shareholder returns, rather than adding output.
According to government projections, U.S. oil production will fall from 11.3 million barrels per daily (bpd), in 2020, to 11.1 million BPD in 2021 and rise to 11.9 Million BPD in 2022. This compares to the record 12.3 million barrels per day in 2019, which was an all-time high.
Strangely, a larger price rise in natural gas futures – which were up 91% this year so far – hasn’t encouraged drillers to look for more gas.
The number of oil rigs increased by 70% over the previous year. However, the number of active gas drilling rigs increased only 23%.
Cowen & Co, a U.S. financial services company, stated that the independent exploration and production companies it tracks expect to increase their spending by about 4% in 2021 versus the 2020s and 11% in 2022 versus the 2021s for the dozen or so firms who have already released estimates for next year.
This follows reductions in capital expenditures of approximately 48% in 2020, and 12% in 2019, respectively.
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