Drilling rig operators make budget cuts ahead of rig count plummet

Drilling rig operators are making budget cuts and bracing for the worst as a global supply glut of crude oil and falling demand due to the coronavirus pandemic are expected to cause the U.S. rig count to plummet. less Drilling rig operators are making budget cuts and bracing for the worst as a global supply glut of crude oil and falling demand due to the coronavirus pandemic are expected to cause the U.S. rig count to ... more Photo: Michael Ciaglo, Staff / Houston Chronicle Photo: Michael Ciaglo, Staff / Houston Chronicle Image 1 of / 1 Caption Close Drilling rig operators make budget cuts ahead of rig count plummet 1 / 1 Back to Gallery

Three of the largest drilling rig operators in Texas are making budget cuts and bracing for the worst as a global glut of crude oil and falling demand due to the coronavirus pandemic are expected to cause the U.S. rig count to plummet.

Although exact figures have yet to be released, Helmerich & Payne, the top drilling rig operator in Texas, has pledged to cut its capital spending budget on top of already existing plans to cut operating costs by $200 million.

Nabors Industries, the second most-active drilling rig operator in Texas, is cutting $75 million dollars from its capital spending budget, suspending dividends to stockholders, cutting salaries for its CEO and chief financial officer by 20 percent and cutting salaries of all employees who make more than $100,000 by 10 percent.

"The announced reactions from operators have been swift and substantial, and the market conditions we face are sure to be difficult," Nabors Industries CEO Anthony Petrello said. "We are acting quickly and decisively. We remain committed to improving the company's capital structure this year even under the expected market conditions, and we are confident these announced measures will support that goal."

Drilling Down: Top 10 drilling rig companies in Texas Patterson-UTI, the fourth most-active drilling rig operator in Texas, also plans to make cuts but has yet to release exact figures. In an investor presentation released on Tuesday, the company reported that it has a strong balance sheet and has a financial runway that may be able to outlast the oil price downturn. The drilling rig operator has a $100 million loan but it is not due until 2022 while $875 million worth of senior notes are not due until 2028 and 2029. Crude oil is trading at near 20-year lows as a price war between Russia and Saudi Arabia has exacerbated a global supply glut while the pandemic has cut demand. West Texas Intermediate crude oil is trading in the $22 per barrel range on Thursday morning, a price too low for most shale drillers. Fuel Fix: Get daily energy news headlines in your inbox There are 772 drilling rigs across the U.S., with more than half of them in the Permian Basin, according to the Baker Hughes Rig Count. That number could fall by 40 percent by the end of June, based on the budget cuts, said James West with the New York investment banking advisory firm Evercore. “Many rigs that are drilling today have been told that they will be relieved of service once their current wells are finished,” West said. “This is already leading to massive layoffs across the oil patch. We can also expect completion and pressure pumping activity to be cut in half.” Read the latest oil and gas news from HoustonChronicle.com