U.S. total rig count decreases

According to the Baker Hughes weekly rig count, the total U.S. rig count was 1,918 during the week ended October 17, which was 12 less than the previous week. This marked the third rig count decline in the past nine weeks. Also, the 12 count decline was the highest since the 17 count slump on August 22.

The U.S. rig count has been on the rise for the last couple of years, but last week marked the lowest rig count in the past seven weeks. On a monthly basis, September’s average U.S. rig count was the highest since July 2012.Must-know: US rig count loses some steam

Last week’s decline in rigs primarily resulted from the sharp decline in oil rigs. The number of active oil rigs in the U.S. decreased by 19 in the past week. The number of natural gas rigs increased by eight. Rigs categorized as “miscellaneous” decreased by one last week.

Horizontal rigs remained unchanged, 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 167, or ~10%. Oil rigs have increased by 212, up 15%. Natural gas rigs have decreased by 44, or ~12%. In the corresponding period of 2013, total rigs decreased by 23.

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 Exxon Mobil (XOM) and EOG Resources (EOG) 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 Halliburton (HAL) 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 The latest EIA inventory report doesn’t offer a break.

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