(Reuters) - U.S. energy firms this week reduced the number of oil rigs operating for a fifth week in a row and the rig count has dropped 24% year-on-year as producers cut spending on new drilling.
Drillers cut three oil rigs in the week to Nov. 22, bringing the total count down to 671, the lowest since April 2017, energy services firm Baker Hughes Co said in its closely followed report on Friday.
In the same week a year ago, there were 885 active rigs.
The oil rig count, an early indicator of future output, has already declined for a record 11 months in a row as independent exploration and production companies cut spending on new drilling as shareholders seek better returns in a low energy price environment.
“Nearly two-thirds of the rig count drop over the past 12 months was due to privately held companies idling their drilling rigs,” according to a report this week by energy information provider Enverus, formerly known as Drillinginfo.
“During this period, a net 29% of private operators, who were drilling at the beginning of this period, have since suspended all of their U.S. drilling operations,” Everus said.
Even though the rig count has declined, oil output has continued to increase in part because productivity - the amount of oil new wells produce per rig - has increased to record levels in most U.S. shale basins.
ConocoPhillips unveiled a long-term plan on Tuesday to boost oil and natural gas production by about 3% per year, restrain annual spending to about $7 billion and return $50 billion to shareholders over the next decade.
The largest U.S. independent crude producer, which has been divesting assets to focus on shale, said it will spend about $4 billion per year on shale, running about 20 drilling rigs across four fields, and boosting shale production from more than 400,000 barrels per day next year to around 900,000 bpd by the end of the decade.
U.S. crude oil output from seven major shale formations is expected to rise about 49,000 bpd in December to a record 9.13 million bpd, the government said in its latest monthly forecast.
U.S. crude futures traded near a two-month high at around $58 per barrel on Friday, putting the contract on track for a third week of gains on expectations of an extension to production cuts by the Organization of the Petroleum Exporting Countries and its allies.
Looking ahead, U.S. crude futures were trading at $56 a barrel in calendar 2020 and $53 in calendar 2021.
U.S. financial services firm Cowen & Co this week said 22 of the exploration and production (E&P) companies it watches reported spending estimates for 2020.
Cowen said there were 16 decreases, one flat and five increases, implying a 13% year-over-year decline in 2020, which puts spending on track to decline for a second year in a row.
Cowen has said the producers it watches expected to spend about $80.5 billion in 2019 versus $84.6 billion in 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 958. Most rigs produce both oil and gas.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, forecast the annual average combined oil and gas rig count will slide from a four-year high of 1,032 in 2018 to 951 in 2019 and 906 in 2020 before rising to 957 in 2021.
That is the same as Simmons forecasts since late September.
Reporting by Scott DiSavino; Editing by Marguerita Choy