US oil explorers, facing crude near $50 a barrel, idled rigs for the 10th straight week, extending an unprecedented retreat in drilling and dragging the nation’s total rig count down to the lowest level in almost five years.
Rigs targeting oil in the US dropped by 84 to 1,056, the least since August 2011, Baker Hughes Inc. said on its website Friday.
The total US count fell by 98 to 1,358, the Houston-based field services company said. Half the decline was in the Permian Basin of Texas and Mexico, the biggest US oil field.
Last year’s 44% slide in crude prices triggered a record pullback in US oil drilling, sidelining more than 400 rigs within two months, erasing tens of thousands of jobs and shrinking estimated exploration and production spending by more than $116 billion.
“Not the best day to be living in Midland, Texas, is it?” James Williams, president of energy consultant WTRG Economics, said. “If the Permian drops another 30 to 40 rigs, oil production growth there comes to a halt.”
The US benchmark West Texas Intermediate oil for March delivery jumped $1.57, or 3.1%, to settle at $52.78 a barrel on the New York Mercantile Exchange. Prices tumbled 49 percent in the last half of 2014.
John J. Christmann, chief executive officer of the Houston-based independent explorer Apache Corp., said Thursday that the drop in oil prices was a “dramatic and almost unprecedented” collapse that’s prompting the company to cut rigs 70% by the end of the month.
Output will slow enough to keep production flat for the year, compared with the company’s November forecast for growth of as much as 12%.
While companies are idling rigs in five major US shale formations, they’ll need to park 200 more for growth to stall, according to data from the US Energy Information Administration.
Output there will reach a record 5.468 million barrels a day in March, and total US production will climb to 9.3 million this year, the highest since 1972, the agency said.
Pioneer Natural Resources Co.’s chief executive officer, Scott Sheffield, said in a phone interview on Wednesday that the company will add two to three rigs annually starting in 2016. The Irving, Texas-based company, with positions in Texas’s Eagle Ford formation and the Permian Basin of Texas and New Mexico, will keep growing, he said.
“The world still needs the Permian Basin,” Sheffield said.
US oil production is at the highest seasonal level since at least 1983, reaching a record 9.23 million barrels a day in the week ended Feb. 6, EIA data show.
Drilling techniques such as horizontal drilling and hydraulic fracturing are increasing the yield from new wells and propping up total output.
While the country’s vertical rig count has fallen 41% in the last three months, horizontal rigs are only down 25%.
US producers are facing increasing competition from foreign suppliers including the Organization of Petroleum Exporting Countries, which accounts for about 40 percent of the world’s oil. Since agreeing in November to maintain production, members of the group have resisted calls to help shrink a global surplus of crude, deepening discounts in major markets such as Asia instead.
The total oil rig count in the US will bottom out at 650 in August, causing the nation’s oil production to dip in the middle of this year, Jodi Quinnell, manager of crude oil analytics for the Louisville, Kentucky-based data provider Genscape Inc., said by phone on February 9.
Total SA became one of the latest oil explorers to announce that it’s tightening its belt in plays such as the Utica shale formation in the eastern US amid lower oil prices.
Investments this year will total $23 billion to $24 billion, down from 2014’s $26 billion, and exploration spending will shrink by 30 percent to less than $1.9 billion, the Courbevoie, France-based company said in a statement this week.
“It falls to upstream as the largest segment in the company to make the deepest cuts,” Arnaud Breuillac, Total’s president of exploration and production, said in a call with analysts.
“On some new projects, cost are just simply too high and we are not going to work contracts.”
Rigs seeking gas in the US fell by 14 this week to 300, Baker Hughes data show. Miscellaneous rigs were unchanged at two.