Baker Hughes says oil producers unlikely to increase spending this year

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By Arathy Somasekhar

HOUSTON (Reuters) – U.S. oil and gas producers are unlikely to increase spending this year and output increases will primarily come from improved efficiencies rather than new drilling, Baker Hughes <BKR.O> Chief Executive Lorenzo Simonelli said on Monday.

The outlook comes as U.S. President Donald Trump’s administration has repeatedly exhorted the industry to “Drill, baby, drill,” to maximize oil and gas production and reduce consumer energy costs.

Still, oil prices have fallen this year and many producers remain focused on capital discipline over uninhibited drilling.

Capital spending by oil and gas companies will be limited by the wave of consolidation that swept the industry in recent years, Simonelli said on the sidelines of the CERAWeek conference by S&P Global in Houston.

“There’s a dislocation between the rig count and production, just driven by the efficiencies of more modern rigs, as well as then the production efficiencies,” he said.

U.S. crude oil futures have eased to less than $67 a barrel in recent weeks, raising fears that the producers might pull back on drilling. Some companies, including Chevron and rival SLB, have announced plans to restructure and lay off staff.

Baker Hughes does not expect to restructure or reduce its workforce currently, Simonelli said.

Large producers have not yet indicated any changes to their capital spending plans despite easing oil prices, Simonelli said. Smaller producers will react quicker to price inflections, he added.

The company also expects any impact from Trump’s tariff proposals to be manageable and mitigated, Simonelli said.

(Reporting by Arathy Somasekhar in Houston; Editing by Liz Hampton and Marguerita Choy)