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Must-know: US oil rig counts reached a new 2014 high of 1,423
marketrealist ^ | Feb 21, 2014 2:05 pm EST | By Ingrid Pan, CFA

Posted on 02/24/2014 1:00:12 PM PST by ckilmer

Must-know: US oil rig counts reached a new 2014 high of 1,423

By Ingrid Pan, CFA - Disclosure • Feb 21, 2014 2:05 pm EST

Continued from Part 1: Why rig counts show a stable oil and gas drilling environment

Oil rig counts increased last week to 1,423, the highest level since 2014 began

Last week, the Baker Hughes oil rig count increased from 1,416 to 1,423, the highest level since 2014 began. Oil rig counts have risen by 45 (or 3%) since the beginning of 2014, with a large part of the increase in the Permian Basin in West Texas (+21), as well as the Niobrara/DJ in the Rockies (+6), and the Cana Woodford in Oklahoma (+6). Out of the current 1,423 oil rigs at work, the majority are either in the Permian (480), the Eagle Ford (187), the Williston (176), the Mississippian (68), or the Granite Wash (49).

2014.02.19-US Oil Rig Count SREnlarge Graph

Baker Hughes noted on its 4Q13 earnings call that it expects an average of 1,350 oil rigs drilling at the end of 2014 and anticipates activity to be roughly flat compared to 2013.

Oil rig counts can indicate how producers such as ExxonMobil (XOM), Pioneer Natural Resources (PXD), Oasis Petroleum (OAS), and EOG Resources (EOG) feel about the drilling and price environment. These companies also comprise ETFs such as the Energy Select SPDR ETF (XLE).

Although oil prices have declined somewhat since reaching ~$110 per barrel in early September (using WTI crude oil prices), they’ve stayed above the $90-per-barrel level for most of 2013 and into 2014 so far, which generally supports oil drilling and, consequently, a high oil rig count. For more analysis on crude oil prices, see WTI crude prices break $100 per barrel for the 1st time in 2014.

Background: U.S. rig counts increased rapidly following the recession but have since flatlined

When the worst of the recession hit, U.S. oil rig counts fell from over 400 to nearly 175. Since bottoming around mid-2009, two major trends caused oil rig counts to rebound rapidly. First, when oil prices sank to below $40 per barrel in early 2009, no one was looking to drill for oil—because it was unprofitable, and frozen capital markets made raising money to fund capex programs expensive. In 3Q09, oil prices recovered to roughly $70 per barrel. Raising money in the capital markets was starting to become easier. Second, during that period, companies were beginning to drill basins that became attractive with the help of new technology, notably shale basins. From mid-2009 to now, more and more oil rigs began working in places like the Bakken Shale in North Dakota, the Eagle Ford Shale in South Texas, and the Permian Basin in West Texas, where previous drilling activity had either stagnated or been minimal.

2014.02.19-US Oil Rig CountEnlarge Graph

Oil rig counts dipped somewhat in mid-2012, a period characterized by some volatility in oil markets, with WTI crude oil prices dropping from over $100 per barrel to under $80 per barrel. Oil prices have since recovered and so have oil rig counts. Note that oil prices remained relatively buoyant over 2013, and most analysts expect oil prices to remain economic enough to drill in the major U.S. oil shale plays (the Bakken, Eagle Ford, and Permian). As companies have begun to disclose their capital expenditure plans for 2014, it seems that oil drilling activity in the U.S. will remain very active. If oil prices remain relatively high and stable, oil rig counts are likely to remain near current levels or continue to increase.


TOPICS: Business/Economy
KEYWORDS: energy; frackingoil; oil; oilrigchart; oilrigs; rigcount; shaleoil

1 posted on 02/24/2014 1:00:12 PM PST by ckilmer
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To: ckilmer

Here on the Bakken, Hess oil’s rig count dropped by 11 , I believe. They had some money issues I know. I hope that they bring back all the rigs this year.


2 posted on 02/24/2014 1:05:28 PM PST by South Dakota (shut up and build a bakken pipe line)
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To: ckilmer

I can only envision America’s energy independence if a true Conservative such as Sarah Palin were at the helm. Under the corrupt, anti-American, pro-union regime of obama and his gang of thugs, the oil industry has been crippled with burdensome regulations and outright bans on drilling. When Conservatism triumphs, drilling will start in ANWR and other regions that obama and his henchmen have placed on the verboten list. When that happens — not if — for a Conservative resurgence is poised to happen, China will be reduced back to its prior state as a mewing, cowering third world country and the muzzie nations will live in constant fear of a mighty, oil-rich America.


3 posted on 02/24/2014 1:07:30 PM PST by re_nortex (DP - that's what I like about Texas)
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To: thackney

fyi

btw, you might want to check out the website. I really like the way they present their info.


4 posted on 02/24/2014 2:50:58 PM PST by ckilmer
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