Why were rig counts lower last week?
Last week’s lower rig count was due to 31 fewer active crude oil rigs. The drop in oil rigs was partially offset by the addition of eight natural gas rigs. In the next part of this series, we’ll see how the crude oil rig count declined.
In the last year, the total US crude oil and natural gas rig count dropped by 929, or 50%. The number of active oil rigs decreased by 831, or 54%, and the number of natural gas rigs fell by 98, or ~30%, over this period. The total rig count increased by 107 for the same period ending April 25, 2014.
Rig count trends and the will to drill
Rig counts tell us how many rigs are actively drilling for oil and gas. Analyzing the changes in the number of active rigs can help us understand how long-term supply could evolve. Oil and gas rig counts signal how confident producers are about drilling for oil and gas.
Falling rig counts indicate a decline in upstream activity. This can result in falling production growth or even production for upstream operators. Pioneer Natural Resources (PXD), Noble Energy (NBL), Rice Energy (RICE), and Apache (APA) are upstream companies. Together, Pioneer Natural Resources and Apache account for 5.5% of the Energy Select Sector SPDR ETF’s (XLE) total market capitalization. Apache accounts for 1% of the iShares Global Energy ETF (IXC).