Rig Count Up Despite Natgas Slip

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (BHI) reported a rise in the U.S. rig count (number of rigs searching for oil and gas in the country), reflecting an increase in the land and offshore rig counts.

The Baker Hughes rig counts, issued since 1944, act as an important yardstick for drilling contractors like Transocean Inc. (RIG), Diamond Offshore (DO), Noble Corp. (NE), Pride International (PDE), Nabors Industries (NBR), Patterson-UTI Energy (PTEN) and Helmerich & Payne (HP) in gauging the overall business environment of the oil and gas industry.

Weekly Summary

Rigs exploration and production in the U.S. totaled 1,659 for the week ended October 1, 2010. This is up by 9 rigs from the previous week’s rig count and just 2 shy of the highest level achieved this year. The current nation-wide rig count is 89% higher from the 2009 low of 876 (set in the week ended June 12, 2009) and significantly exceeds the prior-year level of 1,024. It rose to a 22-year high in 2008, peaking to 2,031 in the weeks ending August 29 and September 12.

Rigs engaged in land operations climbed by 5 rigs to 1,624, offshore drilling increased by 4 rigs to 19, while inland waters activity remained steady at 16 rigs.

Natural Gas Rig Count

The natural gas rig count decreased for the second time in many weeks to 962 rigs (a loss of 5 from the previous week). Despite the weekly decline, the number of gas-directed rigs are just 30 short of an 18-month high reached during mid-August and have rebounded strongly after bottoming out to a 7-year low of 665 on July 17, 2009. Still, the rig count remains 40% lower than its peak of 1,606 in late summer 2008. In the year-ago period, there were 712 active natural gas rigs.

Oil Rig Count

The oil rig count was up by 14 rigs to 687, the ninth gain in the last 11 weeks. The current tally is considerably higher than the previous year’s rig count of 303. It has recovered nicely from a low of 179 in June 2009, nearly quadrupling in number.

Miscellaneous Rig Count

The miscellaneous rig count (primarily drilling for geothermal energy) at 10 remained unchanged from the previous week.

Rig Count by Type

The number of vertical drilling rigs was down 2 to 523. On the other hand, 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) rose by 11 to 1,136.

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