(BHI) U.S. Drilling Rig Count at 34-Month High

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (BHI) reported a rise in the U.S. rig count (number of rigs searching for oil and gas in the country) to its highest level since November 7, 2008. This can be primarily attributed to an increase in the tally of land rigs.

The Baker Hughes rig count, issued since 1944, acts as an important yardstick for drilling contractors such as Transocean Inc. (RIG), Diamond Offshore (DO), Noble Corp. (NE), Nabors Industries (NBR), Patterson-UTI Energy (PTEN) and Helmerich & Payne (HP) in gauging the overall business environment of the oil and gas industry.

Weekly Summary

Rigs engaged in exploration and production in the U.S. totaled 1,985 for the week ended September 16, 2011. This is up by 27 from the previous week’s rig count and represents the first increase in 3 weeks.

The current nationwide rig count is more than double that of the 6-year low of 876 (in the week ended June 12, 2009) and significantly exceeds the prior-year level of 1,661. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending August 29 and September 12.

Rigs engaged in land operations climbed by 27 to 1,934, while inland waters activity and offshore drilling remained steady at 19 and 32, respectively.

Natural Gas Rig Count

The natural gas rig count increased following three consecutive weeks of decline to 912 (a gain of 20 rigs from the previous week). Despite the weekly improvement, the number of gas-directed rigs, which slid to a 16-month low of 866 in May this year but recovered to touch 900 last month, is down approximately 8% from its 2010 peak of 992, reached during mid-August.

In fact, the current natural gas rig count remains 43% below its all-time high of 1,606 reached in late summer 2008, but has rebounded strongly after bottoming out to a 7-year low of 665 on July 17, 2009. In the year-ago period, there were 982 active natural gas rigs.

Oil Rig Count

The oil rig count was up by 5 to 1,062, the first increase after declining for two straight weeks. The current tally is considerably higher than the previous year’s rig count of 670. It has recovered strongly from a low of 179 in June 2009, rising almost 6 times.

Miscellaneous Rig Count

The miscellaneous rig count (primarily drilling for geothermal energy) at 11 was up by 2 from the previous week.

Rig Count by Type

The number of vertical drilling rigs fell by 18 to 607, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was up by 9 at 1,378. In particular, horizontal rig units – that reached an all-time high of 1,140 in August this year – increased by 3 from last week’s level to 1,137.

BAKER-HUGHES (BHI): Free Stock Analysis Report

DIAMOND OFFSHOR (DO): Free Stock Analysis Report

HELMERICH&PAYNE (HP): Free Stock Analysis Report

NABORS IND (NBR): Free Stock Analysis Report

NOBLE CORP (NE): Free Stock Analysis Report

PATTERSON-UTI (PTEN): Free Stock Analysis Report

TRANSOCEAN LTD (RIG): Free Stock Analysis Report

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