Crude oil rig count
Baker Hughes (BHI) reported that the weekly US crude oil rig count rose by five, from 640 to 645, in the week ending July 10. The latest figure marks the second straight rise after 29 weeks of falling crude oil rigs. However, crude oil rigs are still at their lowest levels since August 2010. In the week to July 2, 12 crude oil rigs were added.
For the week ending July 10, crude oil rigs rose in five US basins, while they fell in four basins.
The crude oil rig count is down by 964, or 60%, since hitting 1,609 rigs on October 10, 2014. That week, the crude oil rig count was at its highest level since July 1987, according to Baker Hughes. Lower activity in the oil-rich Permian Basin in West Texas drove most of the fall.
Who gains and who loses?
The price of crude oil has fallen sharply since June of last year, and it still remains on the lower side. This is good for drivers and the economy.
However, oil producers like Denbury Resources (DNR), Cenovus Energy (CVE), and Marathon Oil (MRO) had to cut rigs in operation to reduce costs. So, oil companies not only get lower prices for their crude oil production, but their production may also be reduced.
Lower active rigs are also negative for OFS (oilfield service) companies like Schlumberger (SLB) and Baker Hughes (BHI). In contrast, when crude oil rigs rise like they did last week, it’s good for OFS companies. Rising prices also benefit rig operators, like Nabors Industries (NBR) and Transocean (RIG), as well as rig makers like National Oilwell Varco (NOV). Nabors Industries accounts for 3.4% of the VanEck Vectors Oil Services ETF (OIH).
Rising rigs could lead to greater production, which would increase midstream energy companies’ transportation volumes. This is positive for midstream MLPs (master limited partnerships) like Plains All American Partners (PAA), Williams Partners (WPZ), Genesis Energy (GEL), Targa Resources Partners (NGLS), and Sunoco Logistics Partners (SXL).