uploads///Total US rigs

Is the US Rig Count Fall Steadying?


Dec. 4 2020, Updated 10:42 a.m. ET

US rig count

According to oilfield service company Baker Hughes (BHI), there were 744 active oil and gas rigs in the US in the week ending November 25, 2015. The rig count was 13 fewer rigs than the week before.

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Lowest rig count since April 2002

In the past 14 weeks, 16% of the US rigs, or 141 rigs, were idled. Now, the US rig count is at its lowest level since April 2002.

The four-week average fall in the US rig count was at eight for the week ending November 25. In comparison, the four-week average fall was also eight in the week ending November 20. Four-week averages offer a broader view of the rig counts. Rig counts are volatile on a weekly basis. On a four-week basis, it looks like the fall in US rigs is steady.

Rig counts in perspective

The US rig count experienced a rise throughout most of 2014. However, that trend reversed with 28 consecutive weeks of falling rig counts until the week ending June 19, 2015.

October’s average rig count of 791 represents a fall of 57 from the 848 active rigs in September. In comparison, September’s rig count fell by 35 from August. In 2015, the monthly fall in the US rigs reversed for the first time in July. However, the rigs fell in September and October. This took the rig count back into the falling trend from earlier in the year.

In September 2008, the overall US rig count hit 2,031. This was the highest level since July 1987, according to Baker Hughes. In September 2014, the average rig count came close to that record. It reached 1,931. Since then, ~61% of the rigs were idled as of November 25, 2015.

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Impact on energy companies

Energy companies like Encana (ECA), WPX Energy (WPX), SM Energy Company (SM), Concho Resources (CXO), and RSP Permian (RSPP) have upstream operations. A fall in the rig count typically indicates falling exploration and development activities by these upstream companies. This could lead to lower energy production. On the other hand, a rising rig count could lead to higher energy production. WPX Energy accounts for 0.1% of the Vanguard Energy ETF (VDE).

Upstream MLPs like Memorial Production Partners (MEMP), Legacy Reserves (LGCY), Eagle Rock Energy Partners (EROC), Atlas Resource Partners (ARP), and Vanguard Natural Resources (VNR) are negatively impacted by less drilling. A falling rig count could lower these companies’ throughput volumes. In turn, lower production could raise energy prices. Eventually, this would raise the rig counts.

Let’s take a closer look at the lower total rig count in the US.


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