Oil pumpjackThe latest data from Baker Hughes Inc. (NYSE: BHI) shows that drilling rig counts in North America are down by 59 from a week ago and 256 from the comparable period a year ago. In the U.S., the number of rigs fell from 1,799 last week to 1,774 for the week ending today. The Canadian rig count fell from 418 to 384 in the week.

The decline was largest in oil drilling rigs, with a loss of 69 in the week, the largest decline in 20 years. Natural gas rig counts increased by 7 and there were 3 rigs added as miscellaneous. For the year U.S. natural gas rigs have dropped by 373 and Canadian natural gas rigs have fallen by 30.

Among U.S. states, Texas saw its rig count fall by 18 week-over-week and Lousiana's count fell by 6. For the year, the Texas count is down by 90, while Louisiana is down by 43 and Pennsylvania is down by 39.

The drop in oil rigs does not bode well for oil services companies like Baker Hughes, Halliburton Co. (NYSE: HAL), or Schlumberger Ltd. (NYSE: SLB). Natural gas rig counts have been falling for a year or more, but oil rigs have now declined for five weeks running. The reason for the drop could be a cutback due to generally falling crude prices as the outlook for energy consumption next year slides on weak forecasts for the global economy.

Another possible reason is the wide differential between Bakken and Western Canadian crude to Brent. The North American crudes are fetching about $60 a barrel, a price at which production costs make profits hard to come by on new drilling.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Commodities, Oil & Gas, Research Tagged: BHI, HAL, SLB

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The number of oil and natural gas drilling rigs in operation is totally controlled by the selling PRICE of oil and the selling PRICE of ng.No one wants to invest their money into drilling new wells___when the price of oil or ng is too low for them to make a profit. Using old drilling methods it used to cost around $1.5 million to drill a single well. But today by drilling much deeper and using fracture drilling to locate oil and ng ___it now cost between $5 and $6 million to drill a well. Oil and ng companies are in business for one reason alone___TO MAKE MONEY. So when they cannot make money because oil and ng prices are too low___they cut back on drilling new wells. Over 1 million more barrels of oil are being produced every day now inside the USA than was being produced when George Bush left office and it is because HIGH prices encourages more drilling both inside the USA and around the entire World. Just as higher gold prices encourages more people to go out and find (mine for) gold.

December 22 2012 at 12:50 PM Report abuse rate up rate down Reply