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Rig Count Drops For 3rd Time In 6 Weeks As US Shale Heavyweights Boost Production

The pace of US oil rig count growth has slowed dramatically in the last six weeks as the lagged response to oil prices indicated. While US oil production continues to trend higher, in lagged response to the rise in rigs, it is also nearing its apex. However, four U.S. shale companies recently reported second-quarter production that beat targets and increased their respective full-year output growth guidance.

This is the 3rd weekly drop in the US oil rig count in the last six weeks...

 

Crude Production (in the Lower 48) topped 9mm last week for the first time since July 2015, and this week it rose once again to a new cycle high...but judging by the slowdown in rig count growth, production may be set to slow.

 

However, despite the slowdown in US oil rig count growth, OilPrice.com's Tsvetana Paraskova notes that US shale heavyweights are set to boost production this year.

In a sign that the U.S. shale patch is boosting output that has been keeping a lid on oil prices, four U.S. shale companies reported second-quarter production that beat targets and increased their respective full-year output growth guidance.

EOG Resources reported on Tuesday Q2 total crude oil volumes rising 25 percent to 334,700 barrels of oil per day, setting a company oil production record. The company raised its full-year 2017 U.S. crude oil growth target to 20 percent from 18 percent and total company production growth target to seven percent from five percent, keeping capital spending plans intact.

“EOG can continue to grow at strong rates within cash flow,” Chairman and CEO Bill Thomas said.

Devon Energy beat its midpoint guidance with Q2 net production averaging 536,000 oil-equivalent barrels per day, and said that it was on track to achieve its full-year 2017 production targets. The company cut full-year capital outlook by US$100 million, citing “strong capital efficiencies” and saying it is keeping planned drilling activity for the year.

Diamondback Energy reported Q2 2017 production 25 percent higher than in Q1 2017, and raised full-year production guidance by 5 percent.

Newfield Exploration Company also beat its production targets and increased the mid-point of its full-year 2017 domestic production outlook.

Newfield Exploration now estimates that its year-over-year domestic production growth, adjusted for prior-year asset sales, will be around 8 percent.

“In the best parts of the basins, shale is here to stay,” Rob Thummel, managing director at Leawood, Kansas-based Tortoise Capital Advisors LLC, told Bloomberg, commenting on the shale drillers’ Q2 updates and guidance.

U.S. drillers expect to continue raising production this year, but some are adjusting spending to the expected cash flows in the current oil price environment, after prices failed to rise as much as analysts and investors had expected a few months ago.

“$50 a barrel is still a pretty critical number and that number is going to be even more critical as we move into next year,” Tortoise Capital Advisors’ Thummel told Bloomberg, noting that the lower oil prices could mean that companies would not hedge production as much as they would at higher prices to protect future output.

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Furthermore, OPEC compliance with production cuts agreed last year fell to 86 percent in July, according to a Bloomberg survey published on Aug. 1. That’s the second consecutive monthly drop -- now at the lowest since January -- and is down from 105 percent in April and May.

OPEC output rose by 210,000 barrels to 32.87 million barrels a day in July, driven by Libya, which added 180,000 barrels a day.