In its weekly release, Houston-based oilfield services company Baker Hughes Inc. BHI reported another massive fall in the U.S. rig count (number of rigs searching for oil and gas in the country). This is the fifteenth weekly rig count decline in a row.



This can be attributed primarily to steep cutbacks in the tally of oil-directed rigs, which saw another huge crash. Talking numbers, oil rig count dropped to the lowest level since Mar 2011, as domestic crude prices revolved around the $45-a-barrel level on plentiful supplies and lackluster demand.



Analysis of the Data



Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 1,069 for the week ended Mar 20, 2015. This was down by 56 from the previous week’s rig count and indicates the lowest level in 5 years.



Following the latest decline, the current nationwide rig count is now well below the prior-year level of 1,803. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.



Rigs engaged in land operations – which fell by 39 to 1,030 – were primarily responsible for the weekly rig count plunge. Meanwhile, offshore drilling fell by 11 to 37 rigs, while inland waters activity fell by 6 to 2 units.



Natural Gas Rig Count: A drop of 15 rigs from the previous week took the natural gas rig count to 242 – the lowest level since 1993. As per the most recent report, the count is down approximately 68% from its recent peak of 811, seen in 2012.



In fact, the current natural gas rig count is more than 80% below its all-time high of 1,606 reached in late summer 2008. In the comparable week a year ago, there were 326 active natural gas rigs.



Oil Rig Count: The oil rig count that rocketed to 1,609 in Oct 2014, the highest since Baker Hughes started breaking up oil and natural gas rig counts in 1987, nosedived further (by 41) to 825. As a result of this drop, the current tally is now the lowest in almost four years and well below the previous year’s rig count of 1,473.



Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) of 2 remained unchanged from the previous week.



Rig Count by Type: The number of vertical drilling rigs decreased by 18 to 148, 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 38 to 921. In particular, the horizontal rig units decreased by 20 from the last week’s level to 829.



Gulf of Mexico (GoM): The GoM rig count fell by 11 to 35.



Conclusion



Key Barometer of Drilling Activity: The Baker Hughes data, issued since 1944, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.



An increase or decrease in the Baker Hughes rotary rig count heavily weighs on the demand for energy services – drilling, completion, production, etc. – provided by companies that include large-cap names like Halliburton Co. HAL, Unit Corp. UNT and Schlumberger Ltd. SLB.





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