Baker Hughes, CERAWEEK: Oil producers are unlikely to spend more this year

Baker Hughes CEO Lorenzo Simonelli stated on Monday that U.S. producers of oil and gas are unlikely to increase their spending this year. Instead, the output will be boosted by improved efficiency rather than through new drilling.

The U.S. administration of President Donald Trump has repeatedly urged the oil and gas industry to "Drill baby, drill" to maximize production and lower consumer energy costs.

Even though oil prices are down, many producers continue to focus on capital discipline rather than uninhibited drilling.

Simonelli, speaking at the CERAWeek Conference by S&P Global held in Houston, said that the consolidation wave in the oil and gas industry will limit capital spending.

He said that there was a disconnect between the number of rigs and the production. This is due to the efficiency of the more modern rigs as well as the production efficiencies.

In recent weeks, the price of U.S. crude has dropped to less than $67 per barrel. This has sparked fears that producers may reduce drilling. Chevron, as well as its rival SLB, announced plans to restructure their workforce and reduce staff.

Simonelli stated that Baker Hughes currently does not plan to restructure its workforce or reduce it.

Simonelli stated that despite the easing of oil prices, large producers have yet to indicate any changes in their capital expenditure plans. He added that smaller producers would react faster to price changes.

Simonelli stated that the company expects to manage and mitigate any impact of Trump's proposed tariffs.

(source: Reuters)