UPDATE 1-U.S. oil drillers cut rigs after 3 weeks of additions -Baker Hughes

Fri Jun 24, 2016 1:33pm EDT
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(Adds basins and states)
    June 24 (Reuters) - U.S. oil drillers cut rigs this week for
a 20th week this year after three weeks of additions, according
to a closely followed report on Friday, as crude prices pull
back after a recent rally to an 11-month high over $51 a barrel.
    Despite a decline in U.S. crude to below $48 a barrel on
Friday after Britain voted to leave the European Union, several
companies said recently they plan to boost spending on new
drilling with futures for the balance of the year and 2017
topping $50 a barrel.    
    Analysts and producers have said U.S. crude prices over $50
was a key level that would trigger a return to the well pad. 
    Drillers removed seven oil rigs in the week to June 24,
bringing the total rig count down to 330, compared with 628 a
year ago, Baker Hughes. RIG-OL-USA-BHI
    Before this week, drillers added oil rigs in only four out
of 24 weeks this year, cutting on average eight rigs per week
for a total of 199. Last year, they cut 18 rigs per week on
average for a total of 963, the biggest decline since at least
    Analysts, however, expect the rig count to climb in most
weeks for the rest of this year with prices expected to rise in
prices months.
    Looking forward, futures for the balance of the year
 were trading below $49 while calendar 2017 
was nearly at $51. 
    To capture those rising prices, several producers in recent
weeks said they plan to spend more money on new drilling and the
completion of already drilled wells to boost output, including
Devon Energy Corp, Pioneer Natural Resources Co 
and Energen Corp.  
    Despite the overall oil rig reduction this week, drillers
added four rigs in the Permian in Texas and New Mexico and two
in the Bakken in North Dakota.
    "We expect rig counts to keep rising into year-end as prices
rise, but the backlog of drilled-but-uncompleted wells (DUCs)
could slow the pick-up in drilling as producers potentially look
to reduce the backlog of DUCs before adding rigs," analysts at
U.S. bank Citigroup said in a report.
    Citi said production from DUCs is crucial to production
growth, noting it expects oil and natural gas production to
respectively fall by 760,000 barrels per day and 1 billion cubic
feet per day in 2016 versus 2015 and 160,000 bpd and 3.5 bcfd in
    But with DUCs being completed, Citi forecast production
might only decline by about 600,000 bpd for oil and even rise by
0.1 bcfd for gas in 2016, and rise by 160,000 bpd for oil and
1.2 bcfd for gas in 2017.
    Simmons & Co, energy specialists at U.S. investment bank
Piper Jaffray, expect the number of oil rigs to increase in the
third quarter with about four rigs added per week in the second
half of 2016, four to five per week in the first half of 2017,
five per week in the second half of 2017 and seven per week in

 (Reporting by Scott DiSavino; Editing by Marguerita Choy)