US total rig count
According to oilfield service company Baker Hughes (BHI), there were 1,069 active oil and gas rigs in the US during the week ended March 20, 2015. That count represents 56 fewer rigs than in the week ended March 13 and eight fewer than the previous week’s decline.
The US rig count generally experienced an uptrend in 2014, but that trend has reversed in the past three months. Fourteen consecutive weeks of falling rig counts show that US drilling activity is on a downturn. Last week also saw the eighteenth rig count decrease in the past five months.
After last week’s drop, the US rig count dropped to its lowest level since October 2009. The week’s figures were led by a steep fall in the onshore rig count. Please read Part 6 of this series to learn more about the onshore rig count.
According to Baker Hughes, February’s average rig count of 1,348 declined by 335 rigs from January’s average of 1,683. September’s average rig count of 1,931 was the highest count since July 2012.
Why were rig counts lower last week?
Last week’s lower rig count was mainly due to the crude oil rig count decreasing by 41. Natural gas rigs decreased by 15. 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 734 or 41%. The number of oil rigs decreased by 648 or 44%. The number of natural gas rigs fell by 84 or ~26%. The total rig count increased by 57 for the corresponding period ended March 21, 2014.
Rig count trends and the will to drill
Rig counts tell us how many rigs are actively drilling for oil and gas. Continuing drops in rig counts can be a good sign that demand and supply are nearing a balance. Rig counts also signal how confident producers are about the market for these products.
Companies in the drilling environment include Hess (HES) and Chevron (CVX). These companies are part of the Energy Select Sector SPDR ETF (XLE). Together, they account for 15.2% of XLE’s total market capitalization. These two stocks also account for 33.8% of the iShares US Energy ETF (IYE).
Rig counts also indicate how busy oilfield service companies such as Schlumberger (SLB) and Halliburton (HAL) are at any given time. For more information on Halliburton, please read Wall Street has decent expectations for Halliburton after 4Q14 earnings.