US rig count has continued its nosedive for the seventh consecutive week, falling by another 64 rigs to 465 rigs for the week ending April 24, 2020.
US Rig Count, April 24, 2020 Source: Baker Hughes Rig Count
Key Takeaways:
The current collapse in US rig count is one of the worst seen in years. It is expected that US rig count will fall below the lowest record of 404 rigs that US rig count reached to back in May 2016.
During the current oil price collapse, it took 7 weeks for US rig count to fall from 792 rigs back in March 2020 to 465 rigs in April 2020. In 2016, it took 24 weeks for rig count to fall from 795 rigs to 464 rigs. This illustrates the current low level of confidence in the market in which Oil and Gas operators are not willing to waste anytime spending money while hoping for the oil price to recover. Therefore decisions to suspending drilling activities were made in a very short time following the collapse of oil prices.
The collapse in the number of rigs drilling for Oil & Gas in US will have negative impact on services providers’ Q2 & Q3 2020 earning results especially companies like Halliburton which has almost 50% of its revenue coming form North America.
US rig count is expected to remain between 300-450 rigs for the next few months. It would take months for operators to put rigs back on, and definitely oil prices will not help in making that decision as prices is expected to remain in the $30s/bbl territories for quite sometime this year.
Founder of the Oil Industry Insight., an Oil & Gas industry analytical and business intelligence platform offering insights and analyses, short-term and long-term oil market outlooks and oil prices forecasts. Oil and Gas industry professional recognized and featured on LinkedIn as an Oil & Gas Industry Expert with more than 350,000 followers.
