E-energy circle news, since November 2018, drilling activity in most parts of the United States has stabilized, the number of drilling rigs has dropped sharply, far below the peak level.
The number of rigs often fluctuates with the price of oil, but there is a lag of several months. It will take some time for oil companies to make drilling decisions based on major fluctuations in oil prices. As a result, the sharp fall in prices in the fourth quarter of 2018 continued to spread throughout the system.
But the shale gas industry in the United States has begun to brake. As of the week ending February 22, the total number of oil rigs in the United States was 853, down from the peak of 888 in November. In particular, Permian basins are generally considered the most profitable and productive shale basins, with the number of drilling rigs falling to a nine-month low.
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To be sure, output continues to rise, but growth may soon stabilize. In a report, Standard Chartered Bank analysts led by Paul Horsnell wrote: “We estimate that if the current moderate downward trend continues, the annual growth of American rigs will be negative by the end of May this year, for the first time since 2016.”
Meanwhile, oil prices have risen again, by about 25% this year. If the price of WTI crude oil exceeds $60, many shale oil producers may find that they are confident that they can invest a lot of money and put drilling rigs back into the oil field.
Nevertheless, many drilling companies have formulated more conservative and restrained drilling plans because shareholders are under pressure not to increase budgetary expenditure. According to Bloomberg and RS Energy Group, U.S. oil exploration and production companies cut their spending plans by an average of 4%, while they still expect output to grow by 7%.
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Noble Energy, for example, reported a $824 million decline in fourth-quarter earnings and slashed spending plans for 2019 accordingly. The company expects to spend between $2.4 billion and $2.6 billion this year, much less than $3 billion in 2018. As oil prices fell, the company was forced to charge for impairment, resulting in some assets not available, so the loss was magnified.
According to the Houston Chronicle, David Stover, CEO of Noble Energy, said: “Recent market developments, including increased volatility in commodity prices, further highlight the need for our industry to put capital discipline and corporate returns above output growth.”
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