US Drillers Continue To Lower Rigs In Oil Resources

In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company (NYSE:BHGE) , reported a fall in oil rig count in the United States. However, the number of rigs searching for natural gas has increased.

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 935 in the week ended Sep 22 – lower than the prior week’s 936. Notably, total rig count has declined six times in the last eight weeks.

Since it slipped to an all-time low of 404 last May, rig count has been rising rapidly in U.S. shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 511.

For the week in discussion, the fall in rig count can be attributed to decreased onshore operations and lower inland water activities.

However, count of rigs engaged in offshore operations rose from 17 to 19.

Oil Rig Count: Oil rig count slipped by five to 744. It is to be noted that the rigs exploring crude has decreased seven times in the last nine weeks.

The current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 418.

Natural Gas Rig Count: The natural gas rig count – which plunged to its lowest last August – increased by four units to 190. Like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 92. As per the most recent report, the number of natural gas-directed rigs is nearly 88.2%, below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs increased by one unit to 68, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) fell by two units to 867.

Gulf of Mexico (GoM): The GoM rig count stands at 19 units – 15 of which were oil-directed – higher than the prior count of 17.

Details of the Weekly Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, acts as a yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.

Change in Baker Hughes’ rotary rig count weighs heavily on demand for energy services, drilling, completion, production, etc., provided by companies like Halliburton Company (NYSE:HAL) , Schlumberger Ltd. (NYSE:SLB) , Weatherford International plc (NYSE:WFT) , Diamond Offshore Drilling, Inc. (NYSE:DO) and Transocean Ltd. (NYSE:RIG) .

Conclusion

The number of rigs exploring natural gas in the United States has increased, while that for oil has declined. Overall total oil and gas rigs decreased as a lesser number of drillers gathered in the U.S. shale resources. Eagle Ford shale play and Williston basin saw the removal of three rigs each. Also, two rigs were removed from the DJ-Niobrara basin.

A persistent fall in drilling rigs in U.S. resources helped crude cross the $50-per-barrel mark, significantly higher than the historical low of February 2016.

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