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Rig Counts Dropped 53% in 1 Year: Why It Matters to Investors

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Why were rig counts lower last week?

In the week ending May 29, the US rig count decreased by 13 active crude oil rigs, partially offset by three additional natural gas rigs. In the next part of this series, we’ll discuss why the oil rig count declined.

In the 12 months to May 29, the total US crude oil and natural gas rig count dropped by 991, or 53%. The number of active oil rigs decreased by 890, or 58%. During this period, the number of natural gas rigs fell by 101, or ~31%. The total rig count increased by 95 for the same period ending May 30, 2014.

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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 53% drop in the rig count indicates a decline in upstream activity. Apart from upstream oil and gas producers, 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). Oceaneering International forms 2.6% of the VanEck Vectors Oil Services ETF (OIH).

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