U.S. energy firms this week reduced the number of oil rigs operating for a fifth week in a row as most independent producers cut spending even though majors were still pushing ahead with investments in new drilling.
Drillers cut six oil rigs in the week to Aug. 2, bringing the total count down to 770, the lowest since February 2018, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday. <RIG-OL-USA-BHI>
That is the most weekly declines in a row since March when drillers cut rigs for six consecutive weeks.
During the same week a year ago there were 859 active rigs.
The rig count, an early indicator of future output, has declined over the past eight months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
Independent producer Hess Corp this week said it cut its full-year spending plans by $100 million to $2.8 billion, even as a surge in output in its Bakken shale and Gulf of Mexico assets prompted the company to raise its 2019 production forecast.
ConocoPhillips missed Wall Street estimates for quarterly profit as it spent more than expected and took a hit from lower crude prices due to fears of a slowing global economy. The world's largest independent oil and gas producer also raised its capital spending for 2019 by $200 million to $6.3 billion, citing more drilling in Alaska and the Eagle Ford shale of Texas.
Unlike the independents, oil majors have been increasing their spending to boost production, especially in the top U.S. shale field, the Permian Basin.
Exxon Mobil Corp, the largest U.S. oil producer, boosted its output in the Permian to 274,000 barrels of oil and gas per day in the second quarter, up 90% from a year ago.
Chevron Corp, the second-largest U.S. oil and natural gas producer, saw its second quarter profits surge 26%, as its Permian output rose 21.5% over a the same period a year ago.
U.S. crude output slipped to 12.11 million barrels per day in May from a monthly record high of 12.13 million bpd in April, the U.S. Energy Information Administration (EIA) said in a production report on Wednesday.
For the year, however, total U.S. crude output is expected to rise to a record 12.36 million bpd in 2019, topping the current annual all-time high of 10.96 million bpd in 2018, according to EIA projections.
U.S. financial services firm Cowen & Co this week said that projections from the exploration and production (E&P) companies it tracks point to a 5% decline in capital expenditures for drilling and completions in 2019 versus 2018.
Cowen said independent producers expect to spend about 11% less in 2019, while major oil companies plan to spend about 16% more.
In total, Cowen said all of the E&P companies it tracks that have reported plan to spend about $81.1 billion in 2019 versus $85.4 billion in 2018.
U.S. crude futures traded around $56 per barrel on Friday, putting the contract on track to fall about 1% for the week on U.S. President Donald Trump's promise to impose more tariffs on Chinese imports.
Looking ahead, U.S. crude futures were trading around $56 a barrel for the balance of 2019 and $54 in calendar 2020.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,006. Most rigs produce both oil and gas.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, said it amended its rig count forecast lower because some public land drillers said they would run fewer rigs.
Simmons now expects the average combined oil and gas rig count will slide from a four-year high of 1,032 in 2018 to 970 in 2019 and 955 in 2020 before rising to 997 in 2021.
That compares with Simmons prior forecast of 992 in 2019, 1,011 in 2020 and 1,067 in 2021.
Reporting by Scott DiSavino