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The US Crude Oil Rig Count Drops to a Post–March 2011 Low

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Oil rig counts are at their lowest level since March 2011

Oilfield service company Baker Hughes’s (BHI) US crude oil rig count decreased by 41 for the week ended March 20, down from 866 to 825. The number of oil rigs is now at its lowest level since March 2011.

The steepest decline in oil rigs since 1990 occurred on January 30, 2015, when the oil rig count decreased by 94.

The latest figures mark the fifteenth consecutive weekly fall in crude oil rig counts. In those 15 weeks, the crude oil rig count has crashed by 711.

The Permian Basin was most affected, with a crude oil rig count that decreased by 20 in the past week. In the “other basins” category, there were 26 fewer active oil rigs. “Other rigs” are those in smaller basins or those that don’t fall within a specific geographical basin.

The oil rig count has fallen by 784, or 49%, since hitting a high not that long ago. The rig count was 1,609 on October 10, 2014—its highest since January 2005.

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Producers are at risk

Oil producers such as Whiting Petroleum (WLL), Marathon Oil Corporation (MRO), Concho Resources (CXO), and Continental Resources (CLR) are vulnerable to oil price drops. MRO and CLR together account for 2.7% 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 prices. For more on the relationship between crude oil prices and rigs, please read Part 9 of this series.

To explore the latest crude oil price movements, please refer to Crude Prices Remain Volatile as the US Keeps Pumping More Oil.

One-year oil rig count comparison

In the last year, the number of oil rigs in operation was down by 595, or ~41%. In comparison, the numbers grew by 120 during the corresponding period last year. Activity in the oil-rich Permian Basin in West Texas drove most of the increase in 2014. Please refer to Part 4 of this series for more information on Permian rigs.

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