Friday, November 24, 2017

U.S. drillers Add Most Rigs since June -Baker Hughes

Posted by November 10, 2017

File Image (CREDIT: AdobeStock / (c) Shamtor)

U.S. energy companies added the most oil drilling rigs in week since June as crude prices traded up to their highest levels since the summer of 2015.

    Drillers added nine oil rigs in the week to Nov. 10,
bringing the total count up to 738, General Electric Co's       
Baker Hughes energy services firm said in its closely followed
report on Friday. <RIG-OL-USA-BHI>    
 
    The rig count, an early indicator of future output, is still
much higher than a year ago when only 452 rigs were active after
energy companies boosted spending plans for 2017 in the second
half of last year as crude started recovering from a two-year
price crash.
 
    The increase in drilling lasted 14 months before stalling in
August, September and October after some producers started
trimming their 2017 spending plans when prices turned softer
over the summer.
 
    The U.S. Energy Information Administration this week
slightly lowered its oil production growth forecast for 2017 to
a rise of 370,000 barrels per day from last month's expectations
of a 380,000 bpd increase.        
 
    U.S. production, however, was expected to rise to 9.2
million bpd in 2017 and a record 10.0 million bpd in 2018 from
8.9 million bpd in 2016, the EIA said. Output peaked at 9.6
million bpd in 1970. 
 
    The largest U.S. independent oil and natural gas producer
ConocoPhillips said this week it plans to spend an
average of $5.5 billion annually for the next three years as
long as oil prices stay above $50 per barrel.             
 
    U.S. crude futures traded close to $58 a barrel this
week, their highest since July 2015. So far in 2017, crude
futures have averaged almost $50 a barrel, easily topping last
year's $43.47 average.
 
    Looking ahead, futures were trading near $57 for the balance
of the year and calendar 2018.
 
    Conoco's spending forecast, an increase from 2017 and higher
than many Wall Street analysts expected, comes as it, like some
peers, focuses more on generating profits rather than boosting
production at any cost.
 
    Overall, exploration and production (E&P) companies expect
to increase spending on U.S. drilling and completions in 2017 by
about 53 percent over what they spent in 2016, according to U.S.
financial services firm Cowen & Co.
 
    That expected 2017 spending increase followed an estimated
48 percent year-over-year decline in 2016 and a 34 percent
decline in 2015, Cowen said.
 
    Cowen said nine of the 64 E&Ps they track have already
provided capital expenditure guidance for 2018 indicating a 16
percent increase in planned spending over 2017.
 
    Analysts at Simmons & Co, energy specialists at U.S.
investment bank Piper Jaffray (PJR.SG), this week revised downward their
forecast for the total oil and natural gas rig count to an
average of 872 in 2017, 910 in 2018 and 1,059 in 2019. Two weeks
ago, it forecast 874 in 2017, 923 in 2018 and 1,072 in 2019.
 
    That compares with an average of 868 oil and gas rigs so far
in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil
and gas.
 
    With 907 total oil and gas rigs in operation now, that means
Simmons analysts expect the number of rigs to decline through
the balance of this year before rising next year.
 

Reporting by Scott DiSavino

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