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. However, the number of gas-directed rigs rose and partially offset the downfall. The West Texas Intermediate (WTI) oil futures are currently trading at around $39 per barrel.
Analysis of the Data
Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 737 in the week ended Dec 4, 2015. The latest rig count is down by 7 from the previous week. This is the lowest level since Oct 15, 1999.
The current nationwide rig count is still less than half of the prior-year level of 1,920. 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 710, down by 3 from the previous week. Inland water activity rose by one rig to two rigs. Offshore drilling was down by 5 to 25 units.
Natural Gas Rig Count: The count rose by 3 from the past week to 192. Per the latest report, the number of natural gas-directed rigs has fallen to almost three-fourth of its highest count of 811 that was 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 344 active natural gas rigs.
Oil Rig Count: The rig count fell by 10 from the previous week to 545. 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 1,575.
Rig Count by Type: The number of vertical drilling rigs fell by 5 to 104, 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 2 to 633.
Gulf of Mexico (GoM): The GoM rig count was down by 5 to 25 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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