US oil drillers cut rigs for 7th week to Oct 2009 lows: Baker Hughes

[NEW YORK] US oil drillers cut rigs for a seventh week in a row to the lowest level since October 2009, oil services company Baker Hughes Inc said Friday, although as analysts see an end to the nearly two-year slump in drilling for new wells.

Drillers cut four oil rigs in the week to May 6, bringing the total rig count down to 328, that compares with the 668 rigs operating a year ago, Baker Hughes said in its closely followed report.

In 2015, drillers cut on average 18 oil rigs per week for a total of 963 for the year, the biggest annual decline since at least 1988 amid the biggest rout in crude prices in a generation.

Before this week, drillers cut on average 12 oil rigs per week for a total of 204 so far this year.

The US rig count may finally be bottoming out as companies look for oil prices to rally just a bit more, a signal that the time has come to deploy more capital and get production moving again, analysts say.

Energy firms have sharply reduced oil and gas drilling since the collapse in crude markets began in mid-2014 when US crude futures fell from over US$107 a barrel to hit a near 13-year low at around US$26 in February.

After climbing to a six-month high around US$47 last week, US crude futures this week were heading for their first weekly loss in four weeks, trading around US$45 as investors cash in on the prior month's gains.

US crude futures were fetching about US$46 for the balance of 2016 and about US$48 for calendar 2017.

With prices expected to rise in the future, at least one company announced plans to return to the pad as soon as this month.

Concho Resources Inc this week said it planned to add two rigs in the Midland Basin in West Texas in May. Analysts at Cowen & Co said in a note that Concho planned to add two more rigs in June.

Cowen said it expect US oil and gas land rigs to bottom near current levels between 375 and 400 sometime in the second quarter before increasing in the fourth quarter. The total land rig count was 391 in the week ended April 29, according to Baker Hughes.

The service companies like Baker Hughes and Halliburton Co, however, are still cutting costs to right-size their businesses after crude suffered its biggest price rout in a generation.

After Halliburton pulled out of its proposed merger with Baker Hughes, both companies this week said they were cutting costs.

REUTERS