Horizontal rig count dives to five-year low

By James Sean Dickson
Published: Friday, 20 March 2015

Horizontal rigs lead overall fall with oil exploration on clear downward trend.

The horizontal drill rig count in the US continued to follow its recent sharp downward trajectory in the first half of March 2015, with the total number of horizontal drilling rigs falling by 51 to 895 — the lowest level since mid-2010.

Associated most strongly with oil and gas exploration in the hydraulic fracturing (fracking) industry, though also contributed to by regular oilfields, the horizontal rig count is thought to be indicative of the general state of the fracking business.

While the number of horizontal rigs will also be affected by economic factors, the global recession that began in 2008 resulted in only a relatively small dent in the upward trend. As similar economic contraction is not occurring today, it can be assumed that the fall is due to pricing and demand factors.

The fracking boom of 2013-2014 is visible in the horizontal data released by oilfield services company Baker Hughes Inc.; oil prices falling in mid-late 2014 then led to a reduction in profitability per well, and thus exploration budgets are falling, resulting in less drilling and fewer jobs.

Reducing numbers of horizontal wells looks to be the main drag on the total number of US drilling rigs, which have now dropped by 582 from their September 2014 peak of 1,930 rigs.

While horizontal wells for fracking are most associated with proppants including frac sand and ceramic alternatives, wells also use barite (barytes), bentonite, calcium carbonate and other minerals to increase the density, and change the other physical properties, of drilling mud.

Hopes in India’s state of Andhra Pradesh, one of the world’s main producers of barite, for increased barite prices could now be denied by market realities – fewer rigs will likely result in less barite demand and falling prices.

The secular trend of vertical rig count reduction in the US also appears to have been accelerated by oil price pressures.

Worldwide, the shifts in rig count are yet to have any great significance, owing to the variability in Canadian rig counts that obscures short term trends.