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US Rig Count Falls on Lower Oil Drilling, Gas Rigs Improve

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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- directed rigs. The West Texas Intermediate (WTI) oil futures are currently trading at around $32 per barrel.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 502 in the week ended Feb 26, 20Array6. This was down by Array2 units from the previous week.

The current nationwide rig count is still less than half the prior-year level of Array,267. Notably, the count had risen to a 22-year high in 2008, peaking at 2,03Array in the weeks ended Aug 29 and Sep Array2.

Rigs engaged in land operations were 473 against 487 in the previous week. Inland water activity involved two rigs, flat sequentially. Offshore drilling was up by two rigs to 27 units.

Natural Gas Rig Count: The count was up by one from the past week to Array02. Per the latest report, the number of natural gas-directed rigs has fallen to almost three-fourth of its highest count of 8ArrayArray reached in 20Array2. In fact, the current natural gas rig count is almost 80% below the all-time high of Array,606, reached in late summer 2008. In the year-ago period, there were 280 active natural gas rigs.

Oil Rig Count: The rig count fell by Array3 from the previous week to 400. Interestingly, the number had skyrocketed to Array,609 in Oct 20Array4 - the highest figure to have been reported since Baker Hughes started breaking up the oil and natural gas rig counts in Array987. 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 986.

Rig Count by Type: The number of vertical drilling rigs rose by eight to 58, 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 by 20 to 444.

Gulf of Mexico (GoM): The GoM rig count was up by two to 27 units.

Conclusion

Key Barometer of Drilling Activity: The Baker Hughes data, issued since Array944, 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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