WASHINGTON, Sept. 11 (UPI) — Companies contributing most to U.S. onshore oil production are expected to cut capital spending as the weak oil market endures, a federal energy report said.
West Texas Intermediate, the U.S. benchmark for crude oil prices, closed Thursday at $48.89 per barrel, more than 17 percent below the start of July and more than 50 percent below peak prices in June 2014.
Most oil companies are cutting spending on exploration and production and shedding staff. Though some sectors are performing well, the economy in Texas, the No. 1 oil producer in the nation, is feeling pressure from the downward trajectory for crude oil prices.
The U.S. Energy Information Administration analyzed financial data from 44 companies focused heavily on shale oil production in the United States. With combined production of 2.7 million barrels per day, they accounted for roughly 35 percent of all production in the lower 48 states during the first half of the year.
“Results from second-quarter 2015 financial statements from U.S. companies with onshore oil operations suggest continued financial strain for some companies,” EIA said. “With energy company bond yields widening in relation to U.S. Treasury bonds, some companies may have to reduce capital expenditures further to service their debt.”
EIA in a short-term market report published earlier this week said it expected total crude oil production will decline 4.3 percent from expected full-year 2015 levels to 8.8 million barrels per day by 2016. EIA forecasts were revised down by 100,000 bpd from August. “Unattractive economic returns” were blamed for some of the expected decline.
Reduced spending has been reflected in fewer rigs deployed in shale oil and conventional basins. EIA said the number of rigs used in oil deposits is near a five-year low.
Comment count on this article reflects comments made on Breitbart.com and Facebook. Visit Breitbart's Facebook Page.