The number of drilling rigs across the U.S. continues to decline, which was evident in the latest data released by Baker Hughes (NYSE:BHI). The total number of oil and gas rigs in the U.S has fallen to 1,125 for the week ending Friday, down from more than 1,800 a year earlier, after the oil rig count fell for the fourteenth consecutive week to 866 -- its lowest level in approximately four years.
However, so far, the low rig count has not made any major impact on U.S. oil production growth due to two main reasons. Firstly, a large portion of the rigs that initially came off were directional/vertical rigs rather than the horizontal rigs. The latter produce significantly greater volumes of hydrocarbons in a day than the former. Secondly, the process of the drop in the number of rigs and its impact on U.S. oil production is a lengthy one which usually takes a couple of months, not days.
The number of rigs will likely continue to head lower in the near future. Oppenheimer's analyst James Schumm wrote in a recent report emailed to me that the U.S. rig count will drop by 28% in the first quarter as compared to the final quarter of the last year. That's bad news for oilfield services companies Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL) and Baker Hughes whose woes have been compounded by .… read full article at Seeking Alpha.