Horizontal and vertical rig count down
According to Baker Hughes (BHI), the horizontal rig count fell by 29 for the week ending April 10, 2015, from the previous week’s count, representing the 20th straight week of decline.
Currently, there are 770 active horizontal rigs—602 fewer than the record high of 1,372 reached on November 21, 2014—representing a 44% decline. Horizontal rig counts repeatedly set and broke new records throughout 2014.
The number of vertical rigs declined by eight to 128 last week. In the past year, the number of horizontal rigs has fallen by 454, and vertical rigs are down by 265.
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.
Long-term horizontal rigs higher until March 2015
By the end of March 2015, the horizontal rig count was up by ~125%, compared with 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. Horizontal rig count is an indicator of the shale boom that represents US unconventional oil and gas production. Vertical wells are usually used in conventional production.
Oilfield service companies provide various drilling-related service and technologies. The falling rig count should reduce oilfield service companies’ revenues, as upstream companies push for lower contract terms or day rates.
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 26% of OIH’s market capitalization.
Read the next part of the series to see how the onshore rig count changed last week.