Markets
HAL

U.S. Rig Count Falls Below 1000, 42 More Oil Units Idled - Analyst Blog

A close up of a screen.
Credit: Shutterstock photo

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 eighteenth such decline in a row.

This can be primarily attributed to steep cutbacks in the tally of oil-directed rigs, which saw another huge crash. Talking numbers, the oil rig count dropped to the lowest level since Dec 2010, as crude prices revolved around the $50-a-barrel level on plentiful supplies and lackluster demand expectations.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 988 for the week ended Apr 10, 2015. This was down by 40 from the previous weeks 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 1,831. 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 42 to 951 - were the primary reason for the weekly rig count plunge. Meanwhile, offshore drilling was up by 2 to 33 rigs, while inland waters activity stayed flat at 4 units.

Natural Gas Rig Count: The natural gas rig count increased for the first time in 10 weeks to 225 (a gain of 3 rigs from the previous week). Despite the weekly growth, the number of natural gas-directed rigs is down 72% from its recent peak of 811, achieved in 2012. In fact, the current natural gas rig count remains 86% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 310 active natural gas rigs.

Oil Rig Count: The oil rig count that rocketed to 1,609 in Oct 2014, the highest since Baker Hughes started breaking up oil and natural gas rig counts in 1987, dived further (by 42) to 760. As a result of this drop, the current tally is now the lowest in more than 4 years and well below the previous year's rig count of 1,517.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 3 was down from the previous week's count of 4.

Rig Count by Type: The number of vertical drilling rigs decreased by 8 to 128, 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 32 to 860. In particular, horizontal rig units decreased by 29 from last week's level to 770.

Gulf of Mexico (GoM): The GoM rig count was up by 2 to 31. Both oil and gas drilling went up by a unit each to 23 and 8 rigs, respectively.

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 .

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BAKER-HUGHES (BHI): Free Stock Analysis Report

SCHLUMBERGER LT (SLB): Free Stock Analysis Report

WEATHERFORD INT (WFT): Free Stock Analysis Report

HALLIBURTON CO (HAL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

HAL SLB

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More