Rig Count Falls as Oil Drilling Companies Struggle to Increase Production
Amid the recent downturn in the oil and gas industry exploration, drilling and production companies are struggling to stay active and profitable. Currently oil futures are trading at around $45 a barrel, which is about half the price they were this time last year. Signs of relief don’t appear to be in the immediate future either. The Houston-based oilfield services company, Baker Hughes Inc., released its weekly report earlier this week which indicates the number of U.S. production rigs continues to fall, according to the investment research firm Zacks.com.
According to the report, there were 838 U.S. rigs engaged in exploration and production for the week ending September 25. This was four less than the week prior, and the lowest of such levels since January of 2003. This is approximately half the number of rigs there were last year when the total stood at 1,931.
The one area of the industry that showed positive signs was in offshore drilling operations. The number of rigs involved in offshore rose by two to a total of 33. This makes sense as approximately 30% of the total world oil production (and half the natural gas) is now done by offshore operations. Recent technological advancements now allow offshore drilling to take place 200 miles from the shore in waters over 7,500 feet deep.
Somewhat surprisingly is the report’s findings that natural gas rigs are declining as well. Procedures like hydraulically fracturing shale sites have created a burgeoning market for oil alternatives in the United States. In 2013 alone there were at least two million hydraulically fractured oil and gas wells in the U.S. and up to 95% of all new wells are done that way, according to the Department of Energy. Still, the total number of natural gas rigs dropped by one to 197.
This data from Baker Hughes has been used as an industry measuring stick since its inception in 1944. The information it provides can heavily influence the demand for energy services.