U.S. oil and gas rig count reaches lowest level in over two years

(WO) — Energy companies in the United States have reduced the number of operating oil and natural gas rigs for the second consecutive week, reaching the lowest count since January 2022, according to Baker Hughes' latest report, as reported by Reuters.

The total count of oil and gas rigs dropped by eight to 605 in the week ending May 3, marking the most substantial weekly decline since September 2023. Baker Hughes noted a significant decrease compared to the same period last year, with the overall rig count down by 143, a decline of 19%.

Breaking down the numbers, Baker Hughes reported a decrease of seven oil rigs to a total of 499 for the week, representing the most substantial weekly drop since November 2023. Meanwhile, the count for gas rigs dipped by three, reaching 102, reminiscent of figures seen in December 2021.

This decline in rig count reflects a broader trend, with a drop of around 20% observed in 2023 following consecutive years of significant increases in 2021 and 2022. Factors contributing to this shift include the decline in oil and gas prices, escalating labor and equipment costs amid rampant inflation, and a strategic shift among companies prioritizing debt reduction and shareholder returns over production expansion.

While U.S. oil futures have seen a modest uptick of approximately 9% since the beginning of 2024, following an 11% decline in 2023, the picture is less favorable for gas futures, which have dropped by about 15% in 2024 after a staggering 44% plunge the previous year.

Independent exploration and production (E&P) companies, as tracked by U.S. financial services firm TD Cowen, are planning a slight reduction of around 3% in spending for 2024 compared to the previous year. This contrasts sharply with the significant spending increases witnessed in the preceding years.

APA plans to boost its investment in upstream oil and gas to $2.7 billion in 2024, up from its earlier projection of about $2 billion, following its acquisition of Callon Petroleum. Despite a dip in production during the first quarter, APA remains optimistic, raising its full-year production forecast. This strategic move reflects efforts by gas producers, like APA, to mitigate the impact of declining prices by curtailing production and reducing spending.

This story was originally reported by Reuters.