The U.S. rig count fell for a third month in a row even as drillers added a rig this week for the first time in October, extending the drilling decline that started after crude prices fell below $50 a barrel this summer.
Drillers added one oil rig in the week to Oct. 27, bringing the total count up to 737, Baker Hughes Inc. (NYSE: BHGE), a GE company, said in its closely followed report Oct. 27.
For the month, the rig count fell by 13, the biggest decline since May 2016. It was also the first time since May 2016 that the number of rigs dropped for a third month in a row. The rig count, an early indicator of future output, is still much higher than a year ago when only 441 rigs were active after energy companies boosted spending plans in the second half of 2016 as crude recovered from a two-year price crash.
The recovery in drilling lasted 14 months before stalling in August, September and October after some producers started trimming spending plans when prices turned softer over the summer.
ConocoPhillips this week lowered the amount of capital it expects to spend in 2017 by about 10% to $4.5 billion. In 2016, the company’s capex were $4.9 billion.
Despite plans to cut spending by some E&P companies, U.S. financial services firm Cowen & Co.’s capex tracking increased this week. The 64 E&Ps it tracks planned to increase drilling and completion spending by an average of 50% in 2017 from 2016. That was up from 49% in the prior report. That expected 2017 spending increase followed an estimated 48% decline in 2016 and a 34% decline in 2015, Cowen said.
U.S. crude futures have averaged almost $50 a barrel so far in 2017, easily topping last year's $43.47 average. Looking ahead, futures were trading above $53 for the balance of the year and calendar 2018.
Exxon Mobil Corp. said Oct. 27 it will grow its Permian rig count from 20 currently to 30 by end of 2018 as it aims to boost output 45% a year through 2020.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week revised slightly downward their forecast for the total oil and natural gas rig count, now expecting it to average 874 in 2017, 923 in 2018 and 1,072 in 2019. Last week, it forecast 877 in 2017, 939 in 2018 and 1,087 in 2019. That compares with an average of 867 oil and gas rigs so far in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.
With 909 total oil and gas rigs in operation now, that means Simmons analysts expect the number of rigs will decline through the balance of this year before rising next year.
U.S. production is expected to rise to 9.2 million barrels per day (MMbbl/d) in 2017 and a record 9.9 MMbbl/d in 2018 from 8.9 MMbbl/d in 2016, according to federal energy projections this month.