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US rig count falls again as companies feel out the market

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Jan. 28 2015, Published 11:27 a.m. ET

The US total

According to oilfield service company Baker Hughes (BHI), there were 1,633 active oil and gas rigs in the US during the week ending January 23, 2015. That’s 43 fewer than in the week ending January 16.

The US rig count generally experienced an uptrend in 2014. But that trend has reversed in the past couple of months. Seven consecutive weeks of falling rig counts show that US drilling activity is losing momentum. This was also the eleventh rig count decrease in the past 17 weeks.

After last week’s drop, the US rig count is now at its lowest level since August 2010.

The week’s figures were led by a steep fall in the onshore rig count. Read Part 6 of this series to learn more about the onshore rig count.

According to Baker Hughes, December’s average rig count of 1,882 declined by 43 from November’s average of 1,925. September’s average rig count, 1,931, was the highest since July 2012.

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Why rigs were fewer in number last week

Last week’s decrease was due to the number of crude oil rigs, which was reduced by 49. Natural gas rigs, meanwhile, increased by a count of six. Read the next part of this series to see how a fall in oil prices triggered the decline in the oil rig count.

In the last year, the total US rig count has dropped by 144. Oil rigs decreased by 99, or 7%. Natural gas rigs decreased by 40, or ~11%.

Total rigs increased by 24 for the same period ending January 24, 2014.

Rig count trends show companies’ inclination to spend on drilling

Rig counts tell us how many rigs are actively drilling for oil and gas, and suggest how confident producers are about the market for these products. Companies in the drilling environment include Hess Corporation (HES) and Chesapeake Energy (CHK). These companies are part of the Energy Select Sector SPDR ETF (XLE). Together, these account for 2.3% of XLE’s total portfolio.

Rig counts also indicate how busy oilfield service companies like Schlumberger (SLB) and Baker Hughes (BHI) are at any given moment. Together, these two companies account for 9.3% of XLE. For more on Schlumberger, read An overview of Schlumberger’s 4Q14 earnings.

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