US onshore rig count approaches a gloomy milestone

Apart from a brief eight-month period starting in the summer of 1999, there have been more than 500 oil rigs operating in the continental US for half a century.

As of Friday February 12, 2016 the count stood at 514, according to data from Baker Hughes. It has fallen an average of 23 rigs per week over the past four weeks, which, if the trend continues, means that it will likely dip below 500 next week or the week after.

It’s worth noting that advances in technology and efficiency mean that a single rig today is a much more effective oil producer than 50 years ago, so we’re not exactly comparing like with like here, but still a prolonged fall below this level will be a bitter blow for an industry which needed nearly 2,000 rigs as recently as 2010.

This inexorable fall in the rig count underlines the pain wrought on the industry by oil price’s long falls, and there may be more to come.

Industry journal Oilpro expects independent exploration and production companies to cut capital expenditure again this year, and by more than 30%. “While the weekly figures will ebb and flow, the recent leg down in oil prices means stability for drilling is still out on the horizon,” writes Oilpro’s managing director Joseph Triepke.

As this miserable milepost approaches the onshore oil industry, and its bankers, will be praying that the latest talk of production cuts from major producers in OPEC and elsewhere will amount to more than another false dawn.