U.S. oil drillers make biggest rig cuts in over three months

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(Reuters) – U.S. oil drillers this week cut the most rigs since the week to Jan. 18 and reduced the number of oil rigs operating for a second week in a row and for the fifth straight month, as independent producers follow through on plans to cut spending on new drilling and completions.

Drillers cut 20 oil rigs in the week to April 26, bringing the total count down to 805, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday..

The U.S. rig count, an early indicator of future output, has fallen below year-ago levels when 825 rigs were active.

Major oil companies, like Exxon Mobil Corp and Chevron Corp, however, are boosting their presence, particularly in the Permian, the largest U.S. shale oil field.

Both U.S. oil majors on Friday reported lower profits despite increased production due largely to weakness in their refining operations and lower crude oil and natural gas prices.

Exxon continues to spend heavily to boost its oil and gas output, which had been on a years-long slide. Chief Executive Darren Woods has said he believes the company has an opportunity to invest even as peers have focused more on improving cash flow and share buybacks.

U.S. crude futures were down nearly 4 percent on Friday at $62.80 a barrel as the market retreated from its strongest bull run in at least a year amid profit-taking and efforts to resume Russian oil flows that were interrupted by contamination.

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Looking ahead, crude futures were trading around $62.70 a barrel for the balance of 2019 and $59.80 in calendar 2020.

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 percentage decline in the mid single digits in capital expenditures for drilling and completions in 2019 versus 2018.

Cowen said independent producers expect to spend about 11 percent less in 2019, while major oil companies plan to spend about 16 percent more.

In total, Cowen said all of the E&P companies it tracks that have reported will spend about $81.0 billion in 2019 versus $85.5 billion in 2018.

Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,036. That keeps the total count for 2019 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.

Reporting by Eileen Soreng in Bengaluru; Editing by Marguerita Choy