Is Crude Oil Price Weakness Dragging the US Rig Count?
US onshore rig count
During the week ended September 4, 2015, the US onshore rig count fell by 16 from the previous week’s count. Last week, there were 831 land-based (or onshore) rigs, including four inland water rigs. Inland water rigs remained unchanged last week.
In a state-wise break-up of rigs, Texas lost 11 onshore rigs last week. Six other states also lost onshore rigs last week. In comparison, three states added onshore rigs last week. The US onshore rig count was on a continuous slide until the week ended May 22. It had fallen for 25 straight weeks.
Most prolific states
In the 12 months ended September 4, 2015, the land-based US rig count fell by 1,029, or 55%. The number of active land-based rigs decreased the most in Texas, where 530 rigs shut down. North Dakota lost 112 rigs over those 12 months.
Despite losing a significant number of rigs in the past year, Texas still has the most land-based rigs in the United States with 375, or 45%, of the total. Oklahoma is next, with 106 land-based rigs, and North Dakota follows with 71.
Onshore rig count records
The onshore rig count hit a record high of 1,992 on November 4, 2011, the highest number of rigs in operation since January 1990 records, according to Baker Hughes. Then, the onshore rig count reached 1,876 in the week ended November 21, 2014. In total, 1,045 onshore rigs have gone offline since then, representing a fall of ~56%.
Impact on energy companies
The total onshore rigs in operation mainly reflect the US shale boom. Apart from oil and gas companies, the falling rig count can negatively affect oilfield service companies. These companies provide various land-based, and also offshore, drilling services and technologies. They include Cameron International (CAM), FMC Technologies (FTI), Dresser-Rand Group (DRC), and Weatherford International (WFT). Cameron International forms 0.08% of the SPDR S&P 500 ETF (SPY).
Decreasing rig count could also potentially hurt midstream MLPs like Targa Resources Partners (NGLS), Sunoco Logistics Partners (SXL), Boardwalk Pipeline Partners (BWP), and Energy Transfer Partners (ETP) in the long term. Falling rigs could decrease these companies’ throughput volumes.
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