December 12, 2014 / 6:55 PM / 5 years ago

UPDATE 2-U.S. oil drillers cut rigs, scaling back in Permian - Baker Hughes

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Dec 12 (Reuters) - The number of rigs drilling for oil in the United States fell by 29 this week, the biggest weekly drop in two years, as tumbling crude prices continued to threaten energy company revenues.

The oil rig count dropped to 1,546 in the week to Dec. 12, according to data from oil services firm Baker Hughes on Friday.

The number of oil rigs has declined in six of the last nine weeks since hitting a record high of 1,609 in mid October, as a nearly 50 percent drop in oil prices since the summer begins to take its toll on drilling projects.

Energy traders have been watching rig data to see if the steep price drop has begun to prompt oil drillers to cut back on the number of rigs.

Some analysts cautioned about making too much of just one week’s drop; the number remains up more than 100 from a year ago, when there were 1,411 rigs seeking oil.

Twenty-one of the 29 rigs that were cut were in the Permian Basin, the fastest growing and largest U.S. shale play in West Texas and New Mexico. Analysts said that drilling there is costlier due to the geological complexity of the play, particularly when compared with the Eagle Ford formation in South Texas.

Less efficient vertical rigs fell by 24 to a total of 330, the lowest since 1999, according to the Baker Hughes data. The horizontal rig count, most often used to extract oil from shale rock, fell one this week to 1,367. Horizontal rigs peaked at 1,372 in late November.

“Vertical rigs are less efficient and more on the margins than horizontal rigs, so it certainly makes economic sense that if indeed this decline was a rapid response to the crude price drop then those are the ones that are going to come off,” said Kyle Cooper at IAF Advisors, a consultancy, in Houston.

U.S. crude oil futures on Friday fell as low as $57.34 per barrel, the lowest in five years.

U.S. oil and gas producers are scaling back capital spending plans for 2015.

Reporting by Scott DiSavino and Catherine Ngai in New York; Editing by David Gregorio and Marguerita Choy

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