U.S. energy firms last week added oil and natural gas rigs for a second week in a row but growth in the rig count remains slow as drillers continue to return cash to shareholders from high crude prices rather than boost production.
The oil and gas rig count, an early indicator of future output, rose three to 673 in the week to April 1, its highest since March 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday.
Baker Hughes said that puts the total rig count up 243 rigs, or 57%, over this time last year.
U.S. oil rigs rose two to 533 this week, their highest since April 2020, while gas rigs rose one to 138, their highest since October 2019.
U.S. crude futures were trading around $100 per barrel on Friday after rising for a fourth month in a row in March, mainly as several countries seek to wean themselves off Russian crude after Moscow invaded Ukraine on Feb. 24.
Even though the rig count has climbed for a record 20 months in a row, weekly increases have mostly been in single digits and oil production is still far from pre-pandemic record levels as many companies focus more on returning money to investors and paying down debt rather than boosting output.
“Producers prefer to spend the windfall from high prices on buying back shares and increasing the dividend, and not take the bait and increase production,” said Robert Yawger, executive director of energy futures at Mizuho, a bank.
U.S. crude production was on track to rise from 11.2 million barrels per day (bpd) in 2021 to 12.0 million bpd in 2022 and 13.0 million bpd in 2023, according to federal energy data. That compares with a record 12.3 million bpd in 2019.
After the rig count grew in March by its slowest monthly pace since 2020, analysts at JP Morgan said they “expect drilling activity growth to continue to slow in the second quarter of 2022.”
“With acute labor shortages in the field, drilling could come in lower than we expect, but the effect of that slowdown would not likely show up in production numbers until (the fourth quarter of 2022) at the earliest,” the JP Morgan analysts said.