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U.S. Rig Count Flat, Oil Offsets Decline in Gas Drilling

Per the weekly update released by Houston-based oilfield services company Baker Hughes Inc. BHI , the U.S. rig count (number of rigs searching for oil and gas in the country) is flat with the previous week. This is because an increase in the number of oil-directed rigs was offset by a lower number of gas-directed rigs. Also, the West Texas Intermediate (WTI) oil futures are currently trading at around $34 per barrel.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 709 in the week ended Dec 18, 2015. This figure remained unchanged from the previous week's rig count.

The current nationwide rig count is still less than half of the prior-year level of 1,875. Notably, the count rose to a 22-year high in 2008, peaking at 2,031 in the weeks ended Aug 29 and Sep 12.

The number of rigs engaged in land operations was 684, flat with the previous week. Inland water activity was down from two to one rig. Offshore drilling was up by one to 24 units.

Natural Gas Rig Count: The count was down by 17 from that in the past week to 168 rigs. Per the latest report, the number of natural gas-directed rigs has fallen to almost three-fourth of its highest count of 811 reached in 2012. In fact, the current natural gas rig count is almost 80% below the all-time high of 1,606, reached in late summer 2008. In the year-ago period, there were 338 active natural gas rigs.

Oil Rig Count: The rig count rose by 17 from that in the previous week to 541 rigs. Interestingly, the number had skyrocketed to 1,609 in Oct 2014, which was the highest figure to have been reported since Baker Hughes started breaking up oil and natural gas rig counts in 1987. The current tally not only lies on the lower end of the five-year range but is also well below the previous year's rig count of 1,536.

Rig Count by Type: The number of vertical drilling rigs fell by four to 87, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations that are also known as shale formations) was up by four to 622.

Gulf of Mexico (GoM): The GoM rig count was up by one to 24 units.

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 weighs heavily on demand for energy services like drilling, completion and production provided by companies that include large-cap firms 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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