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US drillers add oil rigs, drop gas

Baker Hughes' overall tally drops by five, Permian count down by two 

US energy companies added oil rigs for a second time in the last three weeks, extending a 15-month drilling recovery, but the pace of additions has slowed in recent months as firms cut spending plans in reaction to declining crude prices.

Drillers added three oil rigs in the week to 11 August bringing the total count up to 768, the most since April 2015, according to Baker Hughes, GE's oilfield services subsidiary.

That compares with 396 active oil rigs during the same week a year ago. Drillers have added rigs in 56 of the past 63 weeks since the start of June 2016.

Including gas rigs, the total Baker Hughes rig count fell by five and ended the week at 949. That compares with an average of 509 in 2016 and 978 in 2015. Gas rigs were down by eight to 181.

Despite the overall increase in oil rigs, the Permian basin count fell by two for a total of 377, double the count this time last year. The Eagle Ford shale in Texas lost three rigs for 75.

The Cana Woodford play in the Anadarko basin added three rigs for 63.

Among states, Texas lost the most with seven rigs, ending the week on 459. New Mexico, home to much of the Delaware sub-basin of the Permian, added one rig for 61. 

US production is expected to rise to 9.4 million barrels per day in 2017 and a record 9.9 million bpd in 2018 from 8.9 million bpd in 2016, according to federal projections.

Those output gains have pressured crude prices lower in recent months, prompting several exploration and production companies, including Carrizo Oil & Gas, Continental Resources and Denbury Resources to cut capital spending.

Those companies and others had mapped out ambitious spending programmes for 2017 when they expected US oil prices to be higher than the near $48.50 per barrel range where they are currently trading.

Despite recently announced spending cuts, the E&Ps still plan to spend much more this year than last year.

Analysts at U.S. financial services firm Cowen & Co said in a note this week that its capital expenditure tracking showed 57 of the 64 E&Ps it follows planned to increase spending by an average of 49% in 2017 from 2016.

That expected 2017 spending increase followed an estimated 48% decline in 2016 and a 34% decline in 2015, Cowen said.

Cowen said it expects the total US count, including both oil and natural gas rigs, to decline through 2017 and 2018.

The US Gulf of Mexico gained a rig for 17. Canada was up three on 220.