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Analyzing the 13% US Onshore Rig Count Fall in the Past 10 Weeks

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US onshore rig count

During the week ended November 6, 2015, the US onshore rig count fell by three. In the week ended November 6, there were 739 land-based (or onshore) rigs, including five inland water rigs. One inland water rig was added in the week ended November 6.

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Onshore rig count falling again

Over the past ten weeks, 114 onshore rigs, or 13%, have been idled. As of November 6, the onshore rig count is at its lowest point since January 2003.

In a statewide breakdown of rigs, New Mexico lost five onshore rigs last week. Five other states also lost onshore rigs last week. In comparison, six states added onshore rigs during the week. The US onshore rig count had been on a continuous slide until the week ended May 22, falling for 25 straight weeks. After slightly stabilizing for a time, the count has been falling again.

Most prolific states

In the 12 months ended November 6, 2015, the land-based US rig count fell by 1,133, or 61%. The number of active land-based rigs fell the most in Texas, where 565 rigs, or 62%, shut down. North Dakota lost 118 rigs, or 65%, over those 12 months.

Despite losing a significant number of rigs in the past year, Texas still has the most land-based rigs in the United States with 340, or 46%, out of the country’s total as of November 6, 2015. Oklahoma is next, with 83 land-based rigs, and North Dakota follows with 63 as of the same date.

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Onshore rig count records

The onshore rig count hit a record high of 1,992 on November 4, 2011, the highest number of rigs in operation since January 1990, according to Baker Hughes. The onshore rig count was recorded at 1,876 in the week ended November 21, 2014. In total, 1,137 onshore rigs have gone offline since November 21, 2014, representing a fall of ~61%.

Impact on energy companies

The total number of onshore rigs in operation mainly reflects the US shale boom. Apart from upstream oil and gas companies, the falling rig count can negatively affect oil field service companies.

These companies provide various onshore and offshore drilling services and technologies and include National Oilwell Varco (NOV), Oceaneering International (OII), Dresser-Rand Group (DRC), and Weatherford International (WFT). National Oilwell Varco forms 0.1% of the SPDR S&P 500 ETF (SPY).

A falling rig count could also potentially have a negative long-term impact on midstream MLPs such as Targa Resources Partners (NGLS), Sunoco Logistics Partners (SXL), Boardwalk Pipeline Partners (BWP), and Energy Transfer Partners (ETP). A falling number of rigs could lower these companies’ throughput volumes.

Continue to the next part of this series for our analysis of the US offshore rig count as of November 6, 2015.

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