2012-04-13

2012 April 13

The Master Resource Report  2012-04-13

Oil & Gas Rig Count

Each week Baker Hughes releases data on the number of rigs drilling for oil and natural gas in the U.S. It is a good time to take a look at that data and develop some historical perspective on the current situation.

The graph below tracks the weekly number of rig drilling for oil and natural gas in North America since January 1999. Oil had hit a low of $10 per barrel, less than one tenth the current price. That first week in January only 133 rigs were searching for new oil and 466 were looking for more natural gas. By the end of February that year oil rigs had dropped to 108 and those searching for gas were soon to drop under 400.

Now fast forward to June 2008 when oil nearly hit $150 per barrel and gas was selling at more than six times its current price. By the end of June there were 375 rigs searching for oil and 1,530 perforating North America in search of more natural gas. A few weeks later the natural gas rig count would peak at 1,606 and the number of rigs drilling for oil would bottom out and begin a climb that continues today.

Click to see larger image.

This graph shows dramatic shift in the percentage of rigs drilling for oil or natural gas in North America since 1999. The relationship has changed entirely from the summer of 2005 when 90% of rigs were searching for natural gas and only10% were searching for oil. Today 67% are searching for oil while only 32% are drilling for natural gas. The number of rigs drilling for natural gas in North America has fallen by over 60% (624) from the high reached in 2008.

Click to see larger image.

The natural gas frenzy that began in the mid 2000’s has clearly cooled while the newest one in oil is still heating up. For investors in and buyers of both oil and natural gas the question now is what will this all look like in 2020. Opportunity?