US crude oil rig count crashes again, lowest since December 2011

Oil rig counts at lowest level since December 2011

Oilfield service company Baker Hughes’s (BHI) crude oil rig count decreased by 83 last week, from 1,223 to 1,140. This is the second highest decline in oil rig counts on BHI record since July 1987. The previous week’s 94 count fall was the steepest.

Oil rigs are now at their lowest level since December 2011.

US crude oil rig count crashes again, lowest since December 2011

The latest figures mark the ninth straight weekly fall in crude oil rig counts. In those nine weeks, the oil rig count dropped by 406. Oil rig activity fell the most in recent weeks.

Among the resource shales, the most affected is the Permian Basin, where the crude oil rig count decreased by 37. In the Williston Basin and Eagle Ford Shale, rig counts decreased by 11 and ten, respectively.

In the other basins category, oil rigs decreased by 19. Other rigs are those in smaller basins or those that don’t fall within a specific geographic basin.

The oil rig count has fallen by 469, or 29%, since hitting a high not that long ago. The rig count was 1,609 on October 10, 2014, the highest since January 2005.

Producers at risk

Oil producers such as Concho Resources (CXO), Chevron Corporation (CVX), Laredo Petroleum (LPI), and Continental Resources (CLR) are vulnerable to oil price drops. CXO, LPI, and CLR together account for 4.5% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). With oil prices continuing to dip, these companies are taking a hit, as revenues are closely tied to crude oil. For more on the relationship between crude oil prices and rigs, read Part 9 of this series.

You might also be interested in Market Realist’s recent series No relief for crude prices in the latest EIA inventory report, which covers the latest crude oil price movements.

One-year oil rig count comparison

In the last year, the number of oil rigs in operation fell by 276, or ~19%. In comparison, the numbers grew by 86 during the same period last year. Activity in the oil-rich Permian Basin in West Texas drove most of the increase in 2014. Read Part 4 of this series for more information about the Permian rigs.

In the next part of this series, we’ll look at why US gas-targeted rig counts increased.