The total number of operating rigs in the US the week ending July 28th was 958, 766 oil and 192 gas. Month on month oil rigs were up 1.3% and gas rigs were up 4.3%, for an overall increase of 0.8%. On a year on year (y/y) comparison, rigs have more than doubled, up 105% for oil and 123% for gas. The combined figure was +107%.
Figure 1 shows the Baker Hughes US Rotary Rig Counts for oil and gas equipment in the US from 2012 to present. Despite the recent upward momentum, the rig count is still sharply lower than recent historic highs that exceeded 2,000.
Figure 2 examines long-term history, from 1987 to present and breaks-out oil and gas rig counts. Since the recent low of 316 units on May 27, 2016, US oil rig counts are up 142%. Gas rig count bottomed out at 81 on August 26th and are up 137% since then. Oil and gas prices are the key driver for rig counts to increase. The trajectory for growth has been stronger for oil than gas.
Prices have moved higher over the past month. Referencing Bloomberg Energy, West Texas Intermediate (WTI) crude oil was $49.74 per barrel today (8/03/2017), up from its recent intra-month low of $44.23 per barrel. Its 52 week range was $42.27 to $58.36 per barrel.
Brent crude oil sold for $51.92 per barrel today, up from its recent intra-month low of $46.71 per barrel. Its 52 week range was $44.88 to $60.13 per barrel. Natural gas was at $2.79 per MMBtu today, very close to its 12 month low of $2.76 per MMBtu. Its 52 week high was $3.60 per MMBtu.
Canadian rotary rig count totaled 220 on July 28th, 129 oil rigs and 91 natural gas rigs. These figures were up 15.2% and 18.2% m/m respectfully. On a y/y comparison, oil rigs were up 115%, while gas rigs increased by 57% for a combined increase of 85%.
Goldman Sachs reports that major oil producers are making more profit today at $50 per barrel oil than they did in early 2014 when oil topped $100 barrel. Back then executives invested heavily on mega projects which had cost overruns, delays and inefficiencies. These projects are online now producing more revenue while in the interim companies cut costs, reduced debt and sold off non-core assets. Large European oil producers are now close to generating sufficient cash to pay dividends and fund capital projects from operations rather than issuing additional shares of stock to cover these expenditures.
At Gerdau we monitor rig counts along with the price of oil and natural gas since it has a major impact on long product sales to include Special Bar Quality sucker rods for downhole pumping strings to merchant and structural products for rigs and oilfield equipment.