Offshore rig count
Last week, the offshore rig count increased by two to 60, which is close to its four-year high of 66 that it reached on August 29, 2014. Year-to-date (or YTD), the offshore rig count fell by one. The current offshore rig count is strong compared to its mid-2010 low of ~20.
Gulf of Mexico
Rig counts in the Louisiana section of the Gulf of Mexico (or GOM) indicate offshore rig activity in the US. The area accounts for almost all of the offshore rigs. GOM rig count increased two to 58 for the week ending December 12 from the previous week.
In 2010, the Gulf of Mexico rig count decreased sharply after BP’s (BP) Deepwater Horizon oil spill. The US government adopted several restrictions in response to the oil spill. The Gulf of Mexico rig count didn’t recover to pre-accident levels for several years. By September 2012, it averaged ~50 rigs. It reached 63 in August. This year, the average rig count in the Gulf of Mexico has been ~55.
Gulf of Mexico activity faced headwinds in 3Q14
In 3Q14, the activities in the Gulf of Mexico decreased again. This time, the challenge was adverse weather conditions.
According to Baker Hughes Incorporated (BHI), “13 different deepwater rigs were delayed at some point in time during the quarter causing a significant decline in well construction activity.” BHI expects activity in the Gulf of Mexico to return to normal levels during 4Q14.
Key stocks and ETFs
The offshore rig count can gauge energy exploration companies’ activity levels. Anadarko Petroleum (APC) and Hess Corporation (HES) are part of the Energy Select Sector SPDR ETF (XLE). These companies operate in deepwater oilfields and benefit from higher offshore oil and gas production.
Higher offshore drilling activity also benefits companies that service offshore drills like BHI. BHI is part of the VanEck Vectors Oil Services ETF (OIH). Read Must-know: Baker Hughes about the company for more information.
In the next part of this series, we’ll discuss how these companies gauge the current energy market scenario. We’ll also review corporate outlooks on oil and gas production. Rig counts also gauge oilfield service companies’ upstream activity. Oilfield service companies include Halliburton Company (HAL) and Schlumberger (SLB). These companies are part of the VanEck Vectors Oil Services ETF (OIH).