In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (BHI - Analyst Report) reported a dip in the U.S. rig count (number of rigs searching for oil and gas in the country).
This can be attributed to cutbacks in the tally of gas-directed rigs that dropped for the sixth straight week to touch another 13-year low, while oil drilling remained stable at its 25-year high level.
The Baker Hughes rig count, issued since 1944, acts as an important yardstick for drilling contractors such as Transocean Inc. (RIG - Analyst Report), Diamond Offshore (DO - Analyst Report), Noble Corp. (NE - Analyst Report), Nabors Industries (NBR - Analyst Report), Patterson-UTI Energy (PTEN - Analyst Report), Helmerich & Payne (HP - Analyst Report), etc. in gauging the overall business environment of the oil and gas industry.
Analysis of the Data
Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 1,959 for the week ended June 29, 2012. This was down by 7 from the previous week’s count and represents the third decrease in as many weeks.
Despite this, the current nationwide rig count is more than double that of the 6-year low of 876 (in the week ended June 12, 2009) and comfortably exceeds the prior-year level of 1,886. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending August 29 and September 12.
Rigs engaged in land operations descended by 7 to 1,893, while inland waters activity and offshore drilling remained steady at 18 and 48 rigs, respectively.
Natural Gas Rig Count: The natural gas rig count decreased for the ninth time in 10 weeks to 534 (a drop of 7 rigs from the previous week). As per the most recent report, the number of gas-directed rigs is at their lowest level since August 20, 1999 and is down almost 43% from its 2011 peak of 936, reached during mid-October.
The current natural gas rig count remains 67% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 874 active natural gas rigs.
Oil Rig Count: The oil rig count remained unchanged at 1,421. The current tally – the highest since Baker Hughes started breaking up oil and natural gas rig counts in 1987 – is way above the previous year’s rig count of 1,006. It has recovered strongly from a low of 179 in June 2009, rising by nearly 8 times.
Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 4 remained unchanged from the previous week.
Rig Count by Type: The number of vertical drilling rigs fell by 15 to 553, 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) was up by 8 at 1,406. In particular, horizontal rig units – that reached an all-time high of 1,193 in May this year – increased by 6 from last week’s level to 1,171.