Why were rig counts lower last week?
In the week ending May 22, the US rig count decreased by one active crude oil rig and one natural gas rig. One miscellaneous rig was also idled last week. In the next part of this series, we’ll discuss why the oil rig count declined.
In the 12 months to May 22, the total US crude oil and natural gas rig count dropped by 972, or 52%. The number of active oil rigs decreased by 869, or 57%. During this period, the number of natural gas rigs fell by 103, or ~32%. The total rig count increased by 95 for the same period ending May 23, 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 change 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.
The 52% drop in the rig count indicates a decline in upstream activity. The falling rig count will also negatively impact oilfield service companies including Exterran Holdings (EXH), Superior Energy Services (SPN), Dresser-Rand Group (DRC), and Oceaneering International (OII). Combined, these companies form 8.7% of the VanEck Vectors Oil Services ETF (OIH).