Houston — U.S. energy firms this week cut the number of oil rigs by the most since September as production grows incrementally because energy firms are boosting shareholder returns and facing higher operating costs due to inflationary and supply chain pressures.
The number of oil rigs, an early indicator of future output, fell seven to 598 in the week to Aug. 5, the first weekly decline in 10 weeks, energy services firm Baker Hughes Co (BKR.O) said in its closely followed report on Friday.
Gas rigs rose four to 161, their highest since August 2019, while the combined oil and gas fell by three to 764, which puts the total rig count up 273, or 56%, over this time last year, Baker Hughes said.
Even though the total rig count has climbed for a record 24 months through July, weekly increases have mostly been in the single digits and oil production is only forecast to recover to pre-pandemic record levels next year.
ConocoPhillips (COP.N) said its full year oil and gas production could rise at a low-single digit percentage rate over last year. But the largest U.S. independent oil producer raised its shareholder payout target by 50% this week after beating Wall Street’s earnings estimates on surging energy prices.
U.S. shale producers Chesapeake Energy Corp (CHK.O), Pioneer Natural Resources Co (PXD.N) and Coterra Energy Inc (CTRA.N), which also reported strong second-quarter profits this week, boosted shareholder returns with higher dividends and buybacks.
But with oil prices up about 19% so far this year after soaring 55% in 2021 – and pressure from the government to produce more – a growing number of energy firms said they plan to boost spending for a second year in a row in 2022 after cutting drilling and completion expenditures in 2019 and 2020.
U.S. financial services firm Cowen & Co said the independent exploration and production (E&P) companies it tracks plan to boost spending by about 35% in 2022 versus 2021 after increasing spending about 4% in 2021 versus 2020.
That follows a drop in capital expenditures of roughly 48% in 2020 and 12% in 2019.
*Scott DiSavino, Editing: Marguerita Choy – Reuters
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