U.S. total rig count increases
According to the Baker Hughes weekly rig count, the total U.S. rig count was 1,930 during the week ended October 10, eight more than the previous week. Until this week, U.S. rig count activity had been slack for about a month. But this week’s increase marks the U.S. rig count’s return to the upward trend it has enjoyed for the past couple of years.
The number of active oil rigs in the U.S. increased by 18 in the past week. The number of natural gas rigs decreased by ten. Rigs categorized as miscellaneous were unchanged last week.
Horizontal rigs increased, while vertical rigs decreased last week. See Part 7 in this series to learn more about vertical rigs versus horizontal rigs.
In the year to date, the total U.S. rig count was up by 179, or ~10%. Oil rigs have increased by 231 rigs, up 17%. Natural gas rigs have decreased by 52, or ~14%.
Rig count trends show companies’ inclination to spend on drilling
Rig counts represent how many rigs are actively drilling for oil and gas. Baker Hughes noted that rig count trends are “governed by oil company exploration and development spending, which is influenced by the current and expected price of oil and natural gas.”
Rig counts can represent the confidence of oil and gas producers such as Anadarko Petroleum Corporation (APC) and ConocoPhillips (COP) in the drilling environment. These companies are part of the Energy Select Sector SPDR ETF (XLE).
Rig counts are one measure of oil and gas drilling activity. As a result, the figure can gauge oilfield service companies’ activity levels. Oilfield service companies include Schlumberger Limited (SLB) and Baker Hughes Incorporated (BHI). These companies are part of the VanEck Vectors Oil Services ETF (OIH).
Rising rig counts are a good sign for oil and gas producers. They’re also a good sign for oilfield service providers. Continue reading this series to learn what influenced natural gas and oil rig counts this week and to understand why rig counts matter to investors. You may also wish to read Market Realist’s Why you should closely monitor crude oil inventory numbers.