U.S. oil rig count set for biggest quarterly rise in 2 years -Baker Hughes

Fri Sep 23, 2016 1:10pm EDT
 
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Sept 23 (Reuters) - U.S. drillers this week added oil rigs
for a 12th week in the past 13 and were on track to add the most
rigs in a quarter since crude prices plummeted two years ago,
although the momentum has slowed as prices hold below $50 a
barrel.
    Drillers added two oil rigs in the week to Sept. 23,
bringing the total rig count up to 418, the most since February
but still below the 641 rigs seen a year ago, energy services
firm Baker Hughes Inc said on Friday. RIG-OL-USA-BHI
    The oil rig count plunged from a record high of 1,609 in
October 2014 to a low of 316 in May after crude prices collapsed
in the biggest price rout in a generation due to a global oil
glut. That decline continued through the first half of this year
when drillers cut 206 rigs.
    So far this quarter, however, drillers have added or at
least not removed any oil rigs for 13 weeks in a row, the
longest streak of not cutting rigs since 2011.
    With just one week to go in the quarter, oil rig additions
over the past three months were on track to be the most since
the first quarter of 2014 when drillers added 105 rigs. To date,
the count has increased by 88 rigs so far this quarter.
    Continued growth in the rig count in the short-term,
however, could be at risk if the small, independent drillers,
which accounted for about two-thirds of rig additions since May,
pull back if prices remain low.
    "As their cash flows ramped with oil moving from its
February bottom to over $50, they redeployed their cash flows in
the form of rigs," analysts at Evercore ISI, a U.S. investment
banking advisory, said about the small, independent drillers.
    "With WTI (West Texas Intermediate crude) now oscillating in
the mid-$40s, and cash flows declining again due to the lower
oil price, we wouldn't be surprised to see this group of
operators let some rigs go," Evercore said.
    U.S. WTI futures were below $45 per barrel on Friday
but were on track for a 5-percent hike for the week ahead of
next week's meeting in Algeria where the world's biggest
producers are expected to discuss a deal to curb the global oil
glut. 
    Looking forward, analysts said they still expect the rig
count to rise in 2017 and 2018 over 2016, but not by as much as
a few weeks ago as future oil price forecasts hold in the $50 to
$60 a barrel range.
    Futures for calendar 2017 were trading around $48
a barrel, while calendar 2018 was about $51.
    "Based on a lower assumed price deck of about $50-60 for the
next two years, we are moderating our exploration and production
capital spending and activity growth assumptions," analysts at
Simmons & Co, energy specialists at U.S. investment bank Piper
Jaffray, said in a note.
    Simmons reduced its average total oil and natural gas rig
count forecasts to 495 from 498 in 2016, to 647 from 704 in 2017
and to 857 from 981 in 2018. 
    The combined number of oil and gas rigs active so far this
year has averaged 480 rigs, according to Baker Hughes data. That
compares with an average rig count of 978 in 2015.

    
 (Reporting by Scott DiSavino; Editing by Marguerita Choy)