KORNER REPORT / North American Rig Activity
U.S. Oil Rig Count At 55-Year Low - Canada Rig Count Increases
From Previous Week
In another bad sign for the struggling oil business, the number of
oil and gas rigs operating in the United States has fallen to the
lowest level since a well-known industry watcher began keeping count
in 1944.
The decline in the number of rigs to 588 this week, below the
previous record low of 596 set in June 1992, was a new danger signal
for an industry that has been walloped by a sharp decline in price
for crude. During the same week last year, a total of 996 rigs were
operating.
''When it's as low as it is now, we're a pretty anemic industry,''
said John Bell, owner of a small independent oil company in the West
Texas town of Kermit. ''We're about as unhealthy as we can
get.''
Houston-based toolmaker Baker Hughes Inc. has kept track of the count
since 1944. The tally peaked at 4,530 on Dec. 28, 1981, during the
height of the oil boom.
Tony McAloon, director of market research at Baker Hughes, said there
are probably fewer rigs looking for oil and gas in the country now
than at any time since the heady oil boom town days of the early
1900s, when accurate counts were not available.
McAloon said he expects the U.S. oil industry to bottom out some time
this year. ''To find oil in the United States is more expensive than
to find it in various international markets, and so although
international locations can survive with low oil prices, many U.S.
producers cannot.''
Prices for oil have plunged to their lowest levels in more than a
decade as demand withers from suffering Asian economies and oil-
producing nations continue to churn out crude despite a huge
oversupply in world markets.
In the United States, the world's second-largest oil producer after
Saudi Arabia, the crisis has prompted companies to lay off workers,
slash expenses and cut back or completely eliminate drilling projects.
Oil has always been a cyclical industry for workers and this bust
cycle is actually not as bad as some others because many oil states
have diversified their economies.
Nonetheless, in the Houston area alone, about 4,200 oil industry
workers lost their jobs in 1998, including 2,500 positions in
exploration and production, Texas Workforce Commission data show.
''Unfortunately, the number of rigs is directly linked to the number
of jobs in the oil patch,'' said Morris Burns, executive vice
president of the Permian Basin Petroleum Association, with 1,200
members in Texas and New Mexico.
''All of the service industries -- people selling pipe, mud,
engineers, geologists -- all of these people are working when the
rigs are running and they're not when the rigs stop,'' Burns said.
Larger oil companies -- most notably Exxon (NYSE:XON) and Mobil --
are merging to help them weather the storm. But for the country's
smaller producers, cutting back is the only answer.
''I've cut every cost except laying people off, and I'm not saying
that won't happen,'' said oilman E.W. Carter, who has 10 employees at
his tiny company in Osage County, Oklahoma.
''It's just adding to a bleeding ulcer,'' Carter said of the record-
low rig count. ''It's another story of how bad it is.''
All this does little to faze gasoline buyers who are enjoying the low
prices.
''If the devil was delivering the gasoline in a pickup truck, people
wouldn't care as long as it's cheap,'' said Randy Morgan of Dallas at
a gas station offering regular unleaded at 99 cents a gallon. ''We
don't care until it goes up to $1.40.''
The number of rigs drilling on land was down nine to 462, while rigs
working offshore fell three to 105. The number of rigs active in
inland waters was up three to 21.
The Gulf of Mexico rig count declined three to 103.
The number of rigs searching for gas was down five to 465, and the
number of rigs searching for oil dropped four to 122.
There were 154 rigs exploring directionally, 36 exploring
horizontally, and 398 exploring vertically.
In Canada, the number of working rigs jumped six from the previous
week to 354, compared with 512 a year ago.
The states with the largest number of changes in their rig counts
were Texas, which rose eight, California, down five, and New Mexico,
down four.
The weekly rig count reflects the number of rigs exploring for oil
and gas, not those producing oil and gas.
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The Baker Hughes rotary rig count for the US and Canada is a weekly
count of the number of drilling rigs actively drilling wellbores to
find or develop oil or natural gas. The count includes rigs drilling
on land and offshore or in inland waters.
The count includes those rigs that use a significant amount of
oilfield services and supplies; it does not include cable tool rigs,
very small rigs that are truck mounted or rigs that can operate
without a permit . Coiled tubing rigs employed in drilling wells are
included. Rigs are included in the count based on how they are
employed. For example, ‘workover rigs' are included in the drilling
count if and only if they are actively drilling a wellbore. Likewise
‘drilling rigs' that are involved in non-drilling activities such as
workovers, completions or production testing are not included.
To be counted as active a rig must be on the rig site and be drilling
or ‘turning to the right'. A rig is considered actively drilling from
the moment that the well is started or ‘spudded' until drilling
reaches the target depth or ‘TD.' Rigs that are in transit from one
location to another, rigging up or are being used in non-drilling
activities such as workovers, completions or production testing are
NOT counted as active.
Other companies define activity differently than Baker Hughes. Their
counts may include rigs that are on-site or contracted but not
actively drilling. Other counts differ in that they are a census of
rigs that are available for work rather than the actual number
working.
Since 1947 the highest US rig counts were recorded in 1981. The US
Rotary Rig Count was 4,530 on December 28, 1981. The lowest rig count
596, recorded in June 12, 1992.
In Canada the highest monthly average rig count 455, recorded in
August, 1980. The lowest monthly average was 32 in April 1992.
The Baker Hughes rotary rig count was begun in the 1930s for use by
Hughes Tool Company (now Hughes Christensen) in planning its rock bit
production and marketing. As they still do today, field
representative maintained frequent personal contact with the crews
operating rigs in virtually every area having drilling activity,
whether using Hughes Christensen bits or not. This close contact with
drill bit users enabled the company to begin keeping track of the
number of rigs active in each area.
Since Hughes Christensen developed its first rock bit nearly 80 years
ago, the company has collected exhaustive records on the performance
of its bits during customer use in various strata and conditions.
These records cover virtually every onshore and offshore well except
‘tight holes' - those on which the operator restricts the release of
data for competitive reasons. Because of Hughes Christensen's routine
collection of this exhaustive field data, the responsibility for
conducting active rig counts fits right in with the field
representatives other information gathering tasks.
The weekly US Baker Hughes rotary rig count includes the number of
rigs drilling on land, in inland waters and offshore by state. The
land and inland water counts for Louisiana are further divided into
Northern and Southern Louisiana. The Texas Count is released by Texas
Railroad Commission District. In addition the weekly US count
includes the count of rigs drilling for natural gas and oil; and the
number of rigs drilling directional and horizontal wells.
The overall trend in the rig count is determined by the amount of
spending for exploration and development by oil and gas companies.
The current and future price of oil and natural gas is a significant
determinant of their exploration and development expenditures.
Therefore the rig count tends to reflect energy prices however there
are other factors at work including technology, weather and seasonal
spending patterns.
Technology impacts the rig count in three ways. Technologies which
increase the amount of footage that can be drilled with a rig each
year such as improved drill bits reduce the number of rigs require to
drill the same amount of footage. Advances in seismic technology
improve success ratios and reduce the number of dry holes that are
drilled. Still other technologies improve production from new or
existing wells. These technologies include horizontal wells, multi-
lateral wells and re-entry drilling.
Weather also impacts the rig count. Wet ground makes it difficult to
move rigs and set up new sites and is a greater factor than snow or
ice in hampering drilling. Canadian activity is particularly
sensitive to weather. The number of active rigs drops dramatically
every Spring thaw as provincial regulations prohibit the movement of
heavy machinery on soft muddy roads. Hurricanes can also impact the
rig count, particularly offshore.
Seasonal spending patterns also impact oil and gas drilling. In the
US drilling usually falls in the first quarter of each year to a
reach a low between March and May. The rig count rises throughout the
year and peaks in December. This reflects company budgeting and
spending cycles and year end rushes to meet drilling commitments
before leases expire. In recent years the seasonal fluctuation has
had less of an impact on the rig count.
Other factors that influence the rig count from time to time include
tax policies such as the Section 29 credits for non-conventional gas
and new technologies such as horizontal drilling or 3D seismic which
open new opportunities for petroleum companies.
Rotary Rig Count
01/22/1999
This Week Year
Location Week +/- Ago +/- Ago
Land.........................462 -9 471 -377 839
Inland Waters................ 21 3 18 - 4 25
Offshore.....................105 -3 108 - 27 132
United States Total......... 588 -9 597 -408 996
Gulf Of Mexico.............. 103 -3 106 - 28 131
Canada...................... 354 6 348 -158 512
North America............... 942 -3 945 -566 1508
Breakout Information This Week +/- Week Ago +/- Year Ago
Oil......................... 122 -4 126 -274 396
Gas......................... 465 -5 470 -130 595
Miscellaneous............... 1 0 1 - 4 5
Directional................. 154 -3 157 - 87 241
Horizontal.................. 36 -4 40 - 28 64
Vertical.................... 398 -2 400 -293 691
Major State Variances This Week +/- Week Ago +/- Year Ago
Alaska...................... 5 -2 7 - 7 12
California.................. 13 -5 18 - 16 29
Louisiana................... 144 -2 146 - 77 221
New Mexico.................. 23 -4 27 - 31 54
Oklahoma.................... 65 -1 66 - 26 91
Texas....................... 206 8 198 -153 359
Wyoming..................... 29 -1 30 - 18 47
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CANADA MONTHLY AVERAGES
ROTARY RIGS RUNNING
1992 1993 1994 1995 1996 1997 1998
JAN 129 179 300 333 344 401 481
FEB 131 239 324 364 374 409 507
MAR 86 239 270 284 306 375 400
APR 32 83 120 84 84 209 128
MAY 48 103 157 126 120 234 157
JUN 62 187 232 227 245 323 238
JUL 76 159 264 232 291 373 217
AUG 94 170 280 205 285 411 211
SEP 87 177 292 224 250 411 187
OCT 104 199 280 213 281 421 153
NOV 136 225 306 211 327 445 201
DEC 164 257 287 251 343 486 248
-------------------------------------
AVG 97 184 261 230 271 375 261
1985 1986 1987 1988 1989 1990 1991
JAN 330 437 284 190 123 154 205
FEB 393 454 138 312 187 221 243
MAR 395 347 168 313 221 219 209
APR 148 66 60 102 105 79 58
MAY 166 39 61 147 63 66 62
JUN 304 64 122 190 103 91 87
JUL 317 70 161 177 103 117 96
AUG 339 102 182 185 103 114 102
SEP 297 102 248 257 105 108 96
OCT 303 107 274 193 138 130 98
NOV 347 114 275 154 143 165 95
DEC 392 239 198 130 162 189 105
-------------------------------------
AVG 310 179 181 197 130 138 121
1978 1979 1980 1981 1982 1983 1984
JAN 246 304 368 384 248 241 279
FEB 286 366 430 436 339 233 328
MAR 291 341 421 387 304 226 339
APR 164 220 331 162 113 78 134
MAY 151 199 358 167 76 76 151
JUN 245 319 399 227 130 174 228
JUL 286 352 413 232 130 181 258
AUG 311 376 455 230 146 245 269
SEP 295 395 422 223 150 216 237
OCT 315 391 405 223 164 203 248
NOV 338 391 411 229 251 240 289
DEC 333 408 405 261 347 296 347
------------------------------------
AVG 272 339 402 263 200 201 259
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North American Workover Rigs
December 1998
In December the Baker Oil Tools Workover Rig Count was 1,098, a
decrease of 109 rigs from November's (1207) and down 734 from
December of 1997.
The Canadian Workover Rig Count was 282 up 51 from November's (231)
and down 91 from November of 1997.
LEGEND
TX- Texas Gulf Coast RM- Rocky Mountains SE- Southeastern
WT- West Texas MC- Mid Continent WE- Western
NE- North Eastern US- US Total CN- Canada
NA- North America
-----------------------------------------------------------
1992 TX SE MC NE RM WT WE US CN NA
-----------------------------------------------------------
01/92 241 139 203 91 136 368 82 1,260 112 1,372
03/92 226 139 187 83 95 332 77 1,139 84 1,223
04/92 244 118 189 104 99 329 58 1,141 56 1,197
05/92 254 131 208 115 96 314 82 1,200 69 1,269
06/92 301 120 224 138 117 313 95 1,308 91 1,399
07/92 247 123 236 107 100 295 100 1,208 98 1,306
08/92 237 134 220 100 123 281 94 1,189 111 1,300
09/92 259 135 245 128 134 324 101 1,326 91 1,417
10/92 279 133 255 140 136 357 123 1,423 92 1,515
11/92 303 145 308 126 166 360 144 1,552 108 1,660
12/92 304 155 210 124 155 371 124 1,443 126 1,569
-----------------------------------------------------------
1993 TX SE MC NE RM WT WE US CN NA
-----------------------------------------------------------
01/93 295 140 220 101 164 368 93 1,381 140 1,521
02/93 299 160 175 107 130 326 87 1,284 153 1,437
03/93 316 133 264 77 120 346 97 1,353 134 1,487
04/93 326 115 253 78 139 342 92 1,345 54 1,399
05/93 320 135 187 89 119 344 101 1,295 85 1,380
06/93 310 145 194 125 114 320 85 1,293 131 1,424
07/93 328 126 249 99 144 343 93 1,382 129 1,511
08/93 308 126 294 100 151 330 71 1,380 187 1,567
09/93 356 133 247 110 157 324 80 1,407 137 1,544
10/93 348 125 300 152 176 340 105 1,546 120 1,666
11/93 338 157 261 139 183 374 84 1,536 166 1,702
12/93 292 144 290 134 181 381 82 1,504 198 1,702
-----------------------------------------------------------
1994 TX SE MC NE RM WT WE US CN NA
-----------------------------------------------------------
01/94 255 141 255 99 148 339 96 1,333 160 1,493
02/94 238 122 242 130 150 365 82 1,329 124 1,453
03/94 243 128 256 110 141 307 80 1,265 133 1,398
04/94 255 134 233 86 114 292 48 1,162 114 1,276
05/94 249 129 257 98 150 288 85 1,256 139 1,395
06/94 239 106 241 108 136 283 78 1,191 180 1,371
07/94 256 141 293 108 166 293 86 1,343 206 1,549
08/94 237 164 237 139 142 292 62 1,273 276 1,549
09/94 245 130 230 145 158 302 87 1,297 290 1,587
10/94 244 137 228 136 177 322 102 1,346 284 1,630
11/94 260 155 264 123 178 297 81 1,358 275 1,633
12/94 301 148 264 118 168 330 86 1,415 310 1,725
-----------------------------------------------------------
1995 TX SE MC NE RM WT WE US CN NA
-----------------------------------------------------------
01/95 280 137 221 113 122 303 69 1,245 315 1,560
02/95 265 134 245 117 120 296 91 1,268 285 1,553
03/95 247 142 182 113 136 309 84 1,213 246 1,459
04/95 256 146 205 112 113 327 105 1,264 165 1,429
05/95 257 155 204 118 135 346 121 1,336 207 1,543
06/95 235 147 252 115 127 337 117 1,330 252 1,582
07/95 223 142 263 105 135 304 99 1,271 241 1,512
08/95 218 141 236 106 129 344 80 1,254 291 1,545
09/95 235 142 280 104 114 321 84 1,280 329 1,609
10/95 216 162 266 112 124 332 68 1,280 350 1,630
11/95 233 171 243 111 121 325 71 1,275 329 1,604
12/95 237 173 276 94 139 312 71 1,302 322 1,624
-----------------------------------------------------------
1996 TX SE MC NE RM WT WE US CN NA
-----------------------------------------------------------
01/96 232 142 294 77 120 321 69 1,255 333 1,588
02/96 241 156 286 75 143 283 87 1,271 393 1,664
03/96 207 155 285 88 146 284 69 1,234 284 1,618
04/96 237 163 276 87 155 294 84 1,296 129 1,425
05/96 224 158 283 89 140 339 87 1,320 168 1,488
06/96 252 177 291 94 116 340 109 1,379 277 1,666
07/96 252 178 282 113 122 339 92 1,378 346 1,724
08/96 244 168 241 105 137 339 99 1,333 380 1,713
09/96 223 168 260 103 157 341 92 1,344 384 1,728
10/96 263 165 250 102 141 337 116 1,374 427 1,801
11/96 268 171 244 103 142 350 90 1,368 440 1,808
12/96 288 166 305 72 153 358 109 1,451 445 1,896
-----------------------------------------------------------
1997 TX SE MC NE RM WT WE US CN NA
-----------------------------------------------------------
01/97 289 166 282 76 175 333 101 1,422 447 1,869
02/97 269 172 314 83 180 348 100 1,466 489 1,955
03/97 242 168 302 77 169 346 91 1,395 496 1,891
04/97 274 180 270 86 155 327 107 1,399 298 1,697
05/97 261 193 295 80 142 371 100 1,442 270 1,712
06/97 261 197 266 93 152 361 96 1,426 285 1,711
07/97 243 183 284 91 134 359 108 1,402 308 1,710
08/97 277 190 221 103 161 367 105 1,424 330 1,754
09/97 266 194 223 100 172 351 101 1,407 305 1,712
10/97 275 196 208 97 163 372 95 1,406 351 1,757
11/97 248 181 210 83 210 398 87 1,417 339 1,756
12/97 273 181 230 88 208 393 86 1,459 373 1,832
-----------------------------------------------------------
1998 TX SE MC NE RM WT WE US CN NA
-----------------------------------------------------------
01/98 275 164 185 90 182 403 87 1,386 320 1,706
02/98 258 151 213 92 155 411 85 1,365 343 1,708
03/98 243 132 108 80 145 361 74 1,143 343 1,486
04/98 223 117 212 75 127 357 74 1,185 129 1,314
05/98 232 143 162 77 129 308 72 1,123 196 1,319
06/98 219 136 142 76 130 281 74 1,058 197 1,255
07/98 205 118 143 76 123 279 75 1,019 271 1,290
08/98 193 130 140 72 107 281 60 983 253 1,236
09/98 203 119 166 76 121 256 56 997 227 1,224
10/98 230 126 155 78 111 241 62 1,003 215 1,218
11/98 198 123 153 88 127 227 60 976 231 1,207
12/98 202 89 112 77 84 207 45 816 282 1,098
The Baker Oil Tools Workover Rig Count includes only those rigs where
tubing is out of the wellbore and does not include rigs on rod jobs
nor rigs on wells less than 1,500 feet.
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U.S. Gulf Rig Count Rises 2 To 121
There were 121 drilling rigs under contract in the U.S. Gulf as of
January 22, up two from the previous week, Offshore Data Services
said Friday.
The utilization rate for mobile offshore rigs working in the Gulf was
67.6 percent, based on a total fleet of 179.
The number of working rigs in the European/Mediterranean area fell
one to 95 rigs under contract. With a total fleet of 107, the
utilization rate was 88.8 percent.
The worldwide rig count declined by nine this week to 491 out of a
total fleet of 615, a utilization rate of 79.8 percent.
Offshore Data Services said more than half of the worldwide decline
was the result of a dropoff in Venezuelan drilling activity.
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CAODC Weekly Western Canadian Rig Count As Of Jan 19th
WEEK OF JAN 19 VS. JAN 12, 1999 PCT OF RIGS PCT OF
RIGS RIGS FLEET DRILLING FLEET
DRILLING DOWN TOTAL DRILLING YR AGO YR AGO
ALBERTA 305/303 138/150 443/453 69/ 67 393 93
SASK. 18/ 16 42/ 43 60/ 59 30/ 27 64 98
B.C. 66/ 60 5/ 2 71/ 62 93/ 97 73 96
N.W.T. 6/ 7 1/ 0 7/ 7 86/100 3 75
MAN. 0/ 0 1/ 1 1/ 1 0/ 0 1 100
TOTAL 395/386 187/196 582/582 68/ 66 534 96
Figures supplied by (CAODC) Canadian Association Of Oilwell Drilling
Contractors.
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