uploads///Horizontal vs Vertical rig count

Horizontal Rig Count Falls for 19th Consecutive Week

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Dec. 4 2020, Updated 10:52 a.m. ET

Horizontal and vertical rig count down

The horizontal rig count fell by 13 from the previous week’s count, representing the 19th straight week of decline. Currently, there are 799 active horizontal rigs—573 fewer than the record high of 1,372 reached on November 21, 2014. This represents a 42% decline. Horizontal rig counts repeatedly set and broke new records throughout 2014.

The count for vertical rigs also declined last week. The number of vertical rigs declined by eight to 136. In the past year, the number of horizontal rigs has fallen by 412, and vertical rigs are down by 248.

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What’s a horizontal well?

Oilfield service company Baker Hughes (BHI) notes that a horizontal well has a surface that isn’t situated directly above the reservoir that it targets. A horizontal well’s inclination is either more than 80 degrees from vertical, or the lower part of the well can run parallel to the pay zone along the reservoir.

Horizontal wells increase the length of the well that’s exposed to the reservoir, which increases production. In vertical drilling, a well goes straight down until it reaches the formation.

Rig counts can gauge a company’s upstream activity. Continental Resources (CLR) and Apache (APA) are two upstream companies. Continental Resources makes up 1.45% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) market capitalization. Apache is 0.9% of the iShares Global Energy ETF (IXC).

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Horizontal rigs increased in 2014

The number of horizontal rigs spiked in the United States when large quantities of oil and gas were discovered in shale formations. Oil companies combined hydraulic fracturing with horizontal drilling, which allowed them to increase oil and natural gas production by accessing unconventional oil and gas formations.

By the end of March 2015, the horizontal rig count was up by ~125% compared to the number of rigs in January 2007. During the same period, the number of vertical rigs decreased by ~84%, indicating a long-term downward trend.

Rig counts also gauge oilfield service companies’ upstream activity. Oilfield service companies include Weatherford International (WFT) and Schlumberger (SLB), which are part of the VanEck Vectors Oil Services ETF (OIH). Weatherford International and Schlumberger together account for 25.2% of OIH’s market capitalization.

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