Rigs

“Lower for longer” is a phrase applied quite a bit of late to oil prices, but it applies to drilling rigs, too. In a Thursday note on oilfield services companies, analysts at Cowen and Company called an early third quarter bottom of about 900 to the Lower 48 U.S. rig count. But don’t expect there to be a bounce from there as much has changed in the industry.

The U.S. oil and natural gas rig count dropped by 40 in the latest Baker Hughes Inc. tally, busting through the “1,000 barrier” to rest at 988. Natural gas-directed rigs gained a smidge, though, as one analyst noted the staying power of gas production.

As with the overall rig count, declines occurring in U.S. unconventional basins appear to be leveling off, according to Baker Hughes Inc. data for the week ending Thursday April 2, and NGI analysis. However, the downturn has cut the rig census by roughly half, and there are plenty of high-efficiency rigs ready to get back in the game, analysts said.

Perhaps the rate of decline in operating rotary drilling rigs is leveling off if data for the week ending Thursday April 2 is any indication. Declines in the United States and Canada were about the same in the last two rig counts.

If a CEO throws a drill bit out his office window — and who knows, these days one might — it will fall at an increasing rate dictated by the acceleration of gravity. Galileo figured that out. Rig counts fall, too, but unlike any drill bit thrown in exasperation, their pace of descent can slow.

If the Baker Hughes Inc. rotary rig count for North America during the March 23-27 week drops by 113, the tally of active rigs will be half of what it was a year ago. The count for the week ending March 20 shows a decline of 136 rigs in North America at 1,209 active, and that’s down 983 from one year ago.

The decline in U.S. rigs on a year/year basis gained momentum, as evidenced by the most recent Baker Hughes Inc. rig count. The total U.S. rig count fell 41% year/year for the week ending March 20 versus 38% year/year in the previous week’s count.

Land drilling expert Nabors Industries Ltd. saw its average U.S. rig utilization rate drop to 78% in the fourth quarter, with its active domestic rig count down by one-third from the peak a year ago. Customers are “indifferent” to the types of rigs they are dropping, the company’s CEO said.

U.S. operators dumped 75 land rigs for the week ending March 6 (Friday), including 64 drilling for oil and 12 for natural gas, bringing total losses year/year to 600, Baker Hughes Inc. reported.