The latest data from Baker Hughes Inc. (NYSE: BHI) shows that drilling rig counts in North America are down by 59 from a week ago and 256 from the comparable period a year ago. In the U.S., the number of rigs fell from 1,799 last week to 1,774 for the week ending today. The Canadian rig count fell from 418 to 384 in the week.
The decline was largest in oil drilling rigs, with a loss of 69 in the week, the largest decline in 20 years. Natural gas rig counts increased by 7 and there were 3 rigs added as miscellaneous. For the year U.S. natural gas rigs have dropped by 373 and Canadian natural gas rigs have fallen by 30.
Among U.S. states, Texas saw its rig count fall by 18 week-over-week and Lousiana’s count fell by 6. For the year, the Texas count is down by 90, while Louisiana is down by 43 and Pennsylvania is down by 39.
The drop in oil rigs does not bode well for oil services companies like Baker Hughes, Halliburton Co. (NYSE: HAL), or Schlumberger Ltd. (NYSE: SLB). Natural gas rig counts have been falling for a year or more, but oil rigs have now declined for five weeks running. The reason for the drop could be a cutback due to generally falling crude prices as the outlook for energy consumption next year slides on weak forecasts for the global economy.
Another possible reason is the wide differential between Bakken and Western Canadian crude to Brent. The North American crudes are fetching about $60 a barrel, a price at which production costs make profits hard to come by on new drilling.