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Analyzing the US Onshore Rig Count Fall and Its Impact

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US onshore rig count

During the week ending October 30, 2015, the US onshore rig count fell by ten from the count during the previous week. In the week ending October 30, there were 742 land-based (or onshore) rigs, including four inland water rigs. One inland water rig was added in the week ended October 30.

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Count falling again

Over the past ten weeks, 111 onshore rigs, or 13%, have been idled. As of October 30, the onshore rig count is at its lowest point since January 2003.

In a statewide breakdown of rigs, Texas lost seven onshore rigs last week. Four other states also lost onshore rigs last week. In comparison, four states added onshore rigs during the week. The US onshore rig count had been on a continuous slide until the week ending May 22, falling for 25 straight weeks. After slightly stabilizing for a time, the count began falling again.

Most prolific states

In the 12 months ending October 30, 2015, the land-based US rig count fell by 1,134, or 60%. The number of active land-based rigs fell the most in Texas, where 561 rigs, or 62%, shut down. North Dakota lost 118 rigs, or 66%, 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 339, or 46%, out of the country’s total as of October 30, 2015. Oklahoma is next, with 84 land-based rigs, and North Dakota follows with 62 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 ending November 21, 2014. In total, 1,134 onshore rigs have gone off-line since November 21, 2014, representing a fall of ~60%.

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 October 30, 2015.

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