Why were rig counts lower last week?
Last week’s lower rig count was mainly due to there being 11 fewer active crude oil rigs and 11 fewer natural gas rigs. Two miscellaneous rigs were added to the count last week. 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 790 or 44%. The number of active oil rigs decreased by 696 or 46%. The number of natural gas rigs fell by 94 or ~30%. The total rig count increased by 80 for the corresponding period ended April 4, 2014.
Rig count trends and the will to drill
Rig counts tell us how many rigs are actively drilling for oil and gas. Fewer rigs 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.
Some of the major oil and natural gas producers include Hess Corporation (HES), Chesapeake (CHK), and ExxonMobil (XOM). These companies are part of the Energy Select Sector SPDR ETF (XLE). Together, HES and XOM account for 16.5% of XLE’s total market capitalization. These two stocks also account for 22.7% of the iShares U.S. 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 Schlumberger, please read An overview of Schlumberger’s 4Q14 earnings.