Oil Rig Count Down; Oil Production Up

According to the Energy Information Administration (EIA), U.S. oil production for the first nine months of 2019 averaged over 12 million barrels per day. That level of production is 1.4 million barrels per day higher than the same period last year, despite the oil rig count declining steadily in 2019. EIA sees increasing oil production as the trend for the near future. In EIA’s Short Term Energy Outlook, oil production is expected to end the 2019 year 1.3 million barrels per day higher than last year, and it is expected to be another 1 million barrels a day higher next year ending the 2020 year with oil production at 13.29 million barrels per day.

Despite the increase in oil production, the oil rig count declined over a record 11 months as independent exploration and production companies cut spending on new drilling, focusing on earnings growth instead of increased output. U.S. financial services firm Cowen & Co indicated that projections from the exploration and production companies it tracks point to a 5 percent decline in capital expenditures for drilling and completions in 2019 versus 2018. The exploration and production companies Cowen tracks reported plans to spend about $80.5 billion in 2019 versus $84.6 billion in 2018. But that decline, both in magnitude and direction, differs by major oil and gas producers versus independent producers. According to Cowen, independent producers expect to spend about 11 percent less in 2019, while major oil companies plan to spend about 16 percent more.