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US Rig Count Falls as Both Oil & Gas Drilling Deteriorate

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In its weekly release, Houston-based oilfield services company Baker Hughes Inc. BHI reported a fall in the U.S. rig count (number of rigs searching for oil and gas in the country) from the previous week. The decline stemmed from a lower number of oil- and gas-directed rigs. The West Texas Intermediate (WTI) oil futures are currently trading at around $30 per barrel.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 571 in the week ended Feb 5, 2016. This was down by 48 from the previous week.

The current nationwide rig count is still less than half the prior-year level of 1,456. Notably, the count rose to a 22-year high in 2008, peaking at 2,031 in the weeks ended Aug 29 and Sep 12.

Rigs engaged in land operations were 543 against 590 in the previous week. Inland water activity involved two rigs, reflecting an increase by one. Offshore drilling was down by two rigs to 26 units.

Natural Gas Rig Count: The count was down by 17 from the past week to 104. 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 314 active natural gas rigs.

Oil Rig Count: The rig count fell by 31 from the previous week to 467. Interestingly, the number had skyrocketed to 1,609 in Oct 2014 - the highest figure to have been reported since Baker Hughes started breaking up the 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 1,140.

Rig Count by Type: The number of vertical drilling rigs fell by 14 to 60, 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 down by 34 to 511.

Gulf of Mexico (GoM): The GoM rig count was down by two to 26 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 such as 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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