Oil field services company Baker Hughes Inc. (NYSE: BHI) this morning reported that its count of foreign oil & gas drilling rigs fell from 1,285 in June to 1,264 in July. June’s total foreign rig count was the highest in more than two years, and July’s count is the second-highest. Adding in Canadian and US rigs, the total global count is 3,516, well below February’s 3,900 total count, which was the highest in more than two years, but higher than the 3,484 rigs counted in June 2012.
The total international count got a big boost from Canada, where 80 rigs were added in July. The US rig count fell from 1,972 in June to 1,945 in July.
Among the foreign rig count, Latin America showed the largest drop, with 20 fewer rigs in July than in June. Brazil fell by 9 rigs, the most of any country in any region. That might seem odd, given Brazil’s massive investment in developing its offshore fields, but the country’s state-controlled oil company, Petroleo Brasileiros, known as Petrobras, (NYSE: PBR) has been hit with dry holes and rising costs which have tempered the company’s spending plans somewhat.
The overall rise in the global rig count is good news for the services companies like Baker Hughes, Schlumberger Ltd. (NYSE: SLB), Halliburton Co. (NYSE: HAL), and Weatherford International Inc. (NYSE: WFT) that stand to prosper from increased drilling activity. Drilling rigs for natural gas rose to a foreign total of 226 in July from 217 in June, while oil rigs fell from 1,030 in June to 994 in July. But the July oil rig total is second only to the June total for the past two years. Again, Latin America was responsible for most of the drop in oil rigs, with a loss of 15 rigs month-over-month.
Angola was another soft spot for oil rigs, losing six in July, compared with a loss of eight in Brazil and 7 in Venezuela. Angola and Brazil accounted for the loss of 16 offshore rigs in July out of a total loss of 18 rigs. Whether high-cost offshore drilling resumes at its old pace likely depends on crude prices. If prices continue to rise, the economics of offshore drilling get better and more exploration should follow.