US Rig Count Rises On Higher Oil Drilling, Gas Rigs Fall

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (NYSE:BHI) reported a higher U.S. rig count (number of rigs searching for oil and gas in the country) than the previous week. The West Texas Intermediate (WTI) oil futures are currently trading at around $44 per barrel.

Analysis of the Weekly Rig Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 440 in the week ended Jul 8, 2016. This was up by nine from the week before.

The current nationwide rig count is less than half the prior-year level of 863. Notably, the count had peaked at 4,530 in 1981. Inversely, an all-time low was recorded in March. Since then the rig count has recovered marginally.

Rigs engaged in land operations were 417 compared with 408 in the previous week. Inland water activity involved four rigs, flat with the prior week. Offshore drilling was also flat at 19 units.

Natural Gas Rig Count: The count fell by one from last week to 88. However, the current natural gas rig count is almost 95% below the high of 1,606 reached in late summer 2008. In the year-ago period, there were 217 active natural gas rigs.

Oil Rig Count: The count was up by 10 from the previous week at 351. The number had skyrocketed to 1,609 in Oct 2014 – the highest figure to have been reported since Baker Hughes started breaking up oil and natural gas rig counts in 1987. The current tally is well below the previous year’s rig count of 645.

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Rig Count by Type: The number of vertical drilling rigs was flat at 61, while the horizontal/directional rig count (encompassing new drilling technology that can drill and extract gas from dense rock formations, also known as shale formations) was up by nine to 379.

Gulf of Mexico (GoM): The GoM rig count was flat at 18 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. (NYSE:HAL) , Schlumberger Ltd. (NYSE:SLB) and Weatherford International plc (NYSE:WFT) .