BHP Billiton Ltd., the biggest overseas investor in U.S. shale, will cut the number of its rigs there by about 40 percent as plunging petroleum prices add to concerns about lower iron ore earnings.
Drilling and development spending on U.S. onshore oil and gas fell to $1.9 billion in the six months to Dec. 31 from $2.1 billion a year ago, the Melbourne-based company said today in a statement. BHP will cut the number of active rigs to 16 from 26 by July, it said.
Brent crude, a benchmark for more than half of the world’s oil, declined 48 percent last year as increasing output in the U.S. contributed to a global glut. The price of iron ore, the biggest earner at BHP, slumped 47 percent in 2014 as the largest miners raised volumes amid weaker demand from China, the largest buyer.
“Their plans to cut oil drilling rigs in the U.S. is a pointer to what’s to come in the oil market,” Ric Spooner, chief strategist at CMC Markets in Sydney, said today by phone. “We will eventually see a supply response to the drop in the oil price from the U.S. onshore producers.”
U.S. drillers have cut the number of oil rigs in service by 209 since Dec. 5, the steepest six-week decline since Baker Hughes Inc. began tracking the data in July 1987. The count was down 55 to 1,366 in the week to Jan. 16, the data show.