The total number of operating rigs in the U.S. the week as of August 16th was 770 oil and 165 gas (totaling 935). In percentage terms, on a month on month, (m/m) basis, oil rigs were down 1.2% and gas down 5.2%. On a year on year, (y/y) comparison, rigs were down 11.4% for oil and down 11.3% for gas. The combined figure for YoY was -11.5% or -122 rigs.

rig1Figure 1 shows the Baker Hughes U.S. Rotary Rig Counts for oil and gas equipment in the U.S. from 2012 to present. Oil rigs rose have dropped below 1,000 rigs starting in April of 2019 and landing at 958 this week. Gas rigs bottomed-out at 81 in August 2016 then rose steadily topping out at 172 this week.

For the week ending August 16th, Texas was operating 450 rigs (48.0% of the total), Oklahoma with 85, (9.0%), New Mexico with 111, (12.0%). Louisiana had 37 on-land and 25 off-shore, (6%). North Dakota’s count was 48, (5%). These five states together account for 81% of the nation’s rig count.

A drop in oil prices last fall caused oil companies to start cutting back on drilling activity. As a result, the U.S. oil rig count has fallen steadily during 2019 and is now significantly lower than it was a year ago. Nevertheless, domestic crude production has continued to rise.

Investors should know that domestic drillers may not continue to add rigs in the oil patches since the crude pricing scenario is weak and U.S. drillers have a conservative capital spending plan for this year.  Despite the bearish landscape, it would be wise for investors to keep an eye on Permian drillers which are producing more crude with the deployment of lesser rigs.

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.