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US oil drillers drop five rigs

Permian basin of Texas and New Mexico gains six rigs despite overall decline

US energy firms cut the number of oil rigs operating for a third week in a row as a 14-month drilling recovery stalled as companies pared back on spending plans when crude prices were softer.

Drillers cut five oil rigs in the week to 22 September, bringing the total count down to 744, the least since June, Baker Hughes said in its closely followed report on Friday. That put the rig count on track for a second month of losses in a row and also its biggest monthly decline since May 2016. It was also on track for its first reduction in rigs over a three-month period since the second quarter of 2016. The rig count is still higher than the 418 active oil rigs a year ago as energy companies had mapped out ambitious spending programs for 2017 when they expected US crude to be higher than the $50 per barrel range where they are currently trading.

The number of rigs chasing gas climbed by four, however, for a total of 190. That is more than double the 92 that were working a year ago.

Despite the losses, the powerhouse Permian basin of Texas and New Mexico added six rigs this week after dropping two rigs the week before. The basin now has 386 active rigs.

Elsewhere in Texas, the Eagle Ford shale dropped three rigs for 68. The state's overal total rig count grew by one to 453.

New Mexico's Permian gains were also reflected in the state's total, which grew by one to 68.

The Granite Wash, which stretches across the Texas-Oklahoma border, dropped a rig for 14. Another Oklahoma play, the Cana Woodford, shed one rig for 63, while the Arkoma Woodford added a rig for nine. Overall, Oklahoma shed three rigs for a total of 127.

To the west, North Dakota's Williston basin dropped three rigs for 49.

Colorado, another western state, lost two rigs for 33. The loss was reflected in the DJ-Niobrara basin, which shed two rigs for 26.

Louisiana added three rigs for 65, while Alaska added one for five.

The offshore rig count grew by two to 19.

Canada added eight rigs for 220.

Crude prices were up about 7% so far this month after declining in five of the past six months, including a near 6% drop in August as rising US output helped to add to a global glut.

US shale production is set to rise for the 10th month in a row in October to a record high 6.1 million barrels per day, according to a US government projection this week.

Although several exploration and production (E&P) companies have trimmed their investments for this year due to the drop in crude prices, they still planned to spend much more this year than last year.

Analysts at Simmons, energy specialists at US investment bank Piper Jaffray, this week revised lower its forecast for the total oil and gas rig count growth, now expecting it to rise to an average of 881 in 2017, compared to 884 it forecast last week. Forecasts were unchanged to rise to 959 in 2018 and 1114 in 2019. That compares with 859 oil and gas rigs so far in 2017, 509 in 2016 and 978 in 2015.

Analysts at US financial services firm Cowen's capital expenditure tracking was unchanged this week, showing the 64 E&Ps it tracks 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.