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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, partially offset by increase in oil rig count. In particular, the natural gas rig count dropped to another 13-year low, while oil drilling jumped to a new 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 1,953 for the week ended July 13, 2012. This was down by 12 from the previous week’s count and represents the fourth decrease in the past 5 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 1,905. 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 13 to 1,883, offshore drilling was up by 1 to 51 rigs, while inland waters activity remained steady at 19 units.

Natural Gas Rig Count: The natural gas rig count decreased for the tenth time in 12 weeks to 522 (a drop of 20 rigs from the previous week). As per the most recent report, the number of gas-directed rigs is at their lowest level since August 13, 1999 and is down 44% 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 885 active natural gas rigs.

Oil Rig Count: The oil rig count was up by 8 to 1,427. 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 1,013. 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 rose by 6 to 555, 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 down by 18 at 1,398. In particular, horizontal rig units – that reached an all-time high of 1,193 in May this year – decreased by 8 from last week’s level to 1,166.

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