U.S. Drillers Cut Oil And Gas Rigs For The First Time In Three Weeks: Baker Hughes Report

U.S. Drillers Cut Oil and Gas Rigs for the First Time in Three Weeks: Baker Hughes Report.

U.S. energy firms reduced the number of operating oil and natural gas rigs for the first time in three weeks, according to a report by energy services firm Baker Hughes released on Friday. The oil and gas rig count, a key early indicator of future output, decreased by three to 586 in the week ending August 2. This brings the total rig count down by 73 rigs, or 11%, compared to the same period last year.

Baker Hughes reported that the number of oil rigs remained steady at 482, while gas rigs fell by three to 98. Regionally, the Denver-Julesburg (DJ)-Niobrara basin, which spans Colorado, Wyoming, Nebraska, and Kansas, saw a reduction of one rig, lowering the total to nine—the basin’s lowest count since June 2021.

In the Marcellus Shale, covering Pennsylvania, West Virginia, and Ohio, one rig was cut, bringing the total down to 24, the lowest since September 2020. The Permian Shale in West Texas and eastern New Mexico also saw a reduction of one rig, dropping its total to 303, the lowest since February 2022.

Conversely, California added one rig, increasing its total to eight—the highest count since January 2022. In Colorado, one rig was cut, bringing the total to 13, also the lowest since February 2022. Texas, the nation’s top oil-producing state, saw the most significant reduction, with two rigs cut, bringing the total to 274—the lowest since January 2022.

The rig count has dropped by approximately 20% in 2023, following increases of 33% in 2022 and 67% in 2021. This decline is attributed to lower oil and gas prices, higher labor and equipment costs due to inflation, and a shift in focus by companies towards debt reduction and boosting shareholder returns rather than increasing output.

Despite these reductions, U.S. oil futures have risen by about 2% in 2024 after an 11% decline in 2023, while natural gas futures have dropped by 24% so far in 2024 after a steep 44% decline in 2023.

In related news, Exxon Mobil, the leading U.S. oil producer, reported a boost in its second-quarter profit, partly due to increased volumes from its acquisition of shale oil firm Pioneer Natural Resources. Exxon Mobil also raised its annual capital expenditure guidance to $28 billion, up from the previously estimated $23-$25 billion.

The company reported higher cash flow from operations, which will support increased share buybacks and dividends. Exxon plans to repurchase $19 billion in shares this year, the largest share repurchase program among its top Western rivals, up from $17.4 billion last year.