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U.S. Rig Count Falls for Seventeenth Week as Crude Price Dips - Analyst Blog

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. BHI reported another fall in the U.S. rig count (number of rigs searching for oil and gas in the country) - the seventeenth such decline in a row.

This can be attributed to cutbacks in the tally of both oil and gas-directed rigs on the back of depressed prices. Talking numbers, oil rig count dropped to the lowest level since Mar 2011, while those for natural gas drilling were the least since 1987.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 1,028 for the week ended Apr 2, 2015. This was down by 20 from the previous week's rig count and indicates the lowest level in almost 6 years.

Following the latest decline, the current nationwide rig count is now well below the prior-year level of 1,818. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.

Rigs engaged in land operations - which fell by 17 to 993 - were primarily responsible for the weekly rig count plunge. Meanwhile, offshore drilling was down by 3 to 31 rigs, while inland waters activity was flat at 4 units.

Natural Gas Rig Count: This count decreased for the ninth time in as many weeks to 222 (a drop of 11 rigs from the previous week). As per the most recent report, the number of natural gas-directed rigs is at its lowest on record and down 71% from its recent peak of 811, achieved in 2012.

In fact, the current natural gas rig count remains 85% below its all-time high of 1,606 reached in late summer 2008. In the corresponding week a year ago, there were 316 active natural gas rigs.

Oil Rig Count: This count, which rocketed to 1,609 in Oct 2014, the highest since Baker Hughes started breaking up oil and natural gas rig counts in 1987, nosedived (by 11) to 802. As a result of this drop, the current tally is now the lowest in 4 years and well below the previous year's rig count of 1,498.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 4 rose by 2 from the prior week.

Rig Count by Type: The number of vertical drilling rigs decreased by 8 to 136, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was down 12 to 892. In particular, horizontal rig units decreased by 13 from the prior week's level to 799.

Gulf of Mexico (GoM): The GoM rig count was down by 4 to 29.

Conclusion

Key Barometer of Drilling Activity: The Baker Hughes data, issued since 1944, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.

An increase or decrease in the Baker Hughes rotary rig count heavily weighs on the demand for energy services - drilling, completion, production, etc. - provided by companies that include large-cap names like Halliburton Co. HAL , Schlumberger Ltd. SLB and Weatherford International plc WFT .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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