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Horizontal Rig Count Falls for 21st Consecutive Week

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Horizontal and vertical rig count down

According to Baker Hughes (BHI), the horizontal rig count fell by 29 for the week ended April 17, 2015, from the previous week’s count. This represents the 21st straight week of decline.

Currently, there are 741 active horizontal rigs, 631 fewer than the record high of 1,372 reached on November 21, 2014. This represents a 46% decline. Horizontal rig counts repeatedly set and broke new records throughout 2014.

The number of vertical rigs declined by six to 122 last week. In the past year, the number of horizontal rigs has fallen by 483, and vertical rigs are down by 269.

Rig counts also indicate how busy oilfield service companies such as Schlumberger (SLB) and Halliburton (HAL) are at any given time.

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Long-term horizontal rigs higher until March 2015

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%. The rise of horizontal rigs is indicative of the American shale boom. Unconventional, or shale oil, and gas reserves are tapped using a combination of horizontal drilling and hydrofracking. Vertical wells are usually used in conventional production.

Why does falling rig count affect oilfield service companies?

Oilfield service companies provide various drilling-related services and technologies. Falling drilling activity reduces oilfield service companies’ revenues. Upstream companies can also push for cheaper contract terms or day rates in such situations.

Oilfield service companies include Cameron International (CAM) and Baker Hughes (BHI), which are part of the VanEck Vectors Oil Services ETF (OIH). Cameron International and Baker Hughes together account for 11.5% of OIH’s market capitalization.

Read the next part of the series to see how the onshore rig count changed last week.

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