Rig count figures indicate oil and gas improvement

By Kasia Patel
Published: Thursday, 26 January 2017

The latest figures from Baker Hughes, one of North America's largest oilfield services providers, and the American Petroleum Institute, show that drilling activity is improving, particularly in the US, which could help strengthen demand for oilfield minerals such as frac sand and barite.

The latest figures from oilfield services provider Baker Hughes Inc. and the American Petroleum Institute (API) indicate further improvements in global and North American oil and gas drilling activity. 

According to December 2016 rig count figures released by Baker Hughes in early January, international rig count increased by 4 to 929 rigs compared with November 2016, although this was down 166 from 1,095 counted in December 2015.

The average US rig count meanwhile increased 54 in December to 634, compared with 580 in November 2016. Year-on-year (y-o-y) this was down 80 on the 714 counted in December the previous year.

Overall, the worldwide rig count for December increased 94 on the previous month to 1,772.

The global rig count is an indicator of worldwide oil and gas drilling activity, which in turn is a solid predicator of demand for oilfield minerals such as silica (frac) sand, barite (barytes) and bentonite. 

January figures from the API also reflect a slowdown in the oil and gas decline, with estimated total wells drilled and completed in Q4 2016 in the US showing a decline of 8.8% compared with the previous quarter. The decrease is an improvement on the previous year, when between Q3 2015 and Q4 2015 the amount of wells drilled and completed in the US fell 21%.

"[January’s] report shows evidence that the consistent decline in oil and natural gas drilling could be coming to an end," said the API’s statistics department director, Hazem Arafa.

"Even with the decline, our nation has established itself as the world leader in the production and refining of oil and natural gas and in the reduction of carbon emissions, which are near 20-year lows," Arafa added. "Moving forward, it’s important to put in place policies that embrace America’s leadership in energy that’s providing benefits for American consumers, American workers and the environment."

North American rig count January 2015 to January 2017 
Source: Baker Hughes 

Baker Hughes launches BJ Services

In early January, Baker Hughes completed its pending transaction together with CSL Capital Management and West Street Energy Partners (WSEP), a fund managed by the Merchant Banking Division of Goldman Sachs, to create a new North American oilfield services company.

The newly-formed BJ Services will provide hydraulic fracturing (fracking) and cementing services to the North American markets. 

In a statement issued on 30 December, Baker Hughes said that the new company does not include its international pressure pumping business or its Gulf of Mexico offshore pressure pumping operations, which will continue to be operated by Baker Hughes.

Baker Hughes will retain a 46.7% ownership stake in the privately-held new company, and will receive $150m in cash. According to the company, BJ Services "will be led by an experienced management team and governed by a seasoned board of industry leaders". 

"The proposed transaction will create a pure play pressure pumping competitor for the benefit of shareholders, customers and employees," Baker Hughes CEO, Martin Craighead, said. "The new company will benefit from a sharp focus on pressure pumping to respond quickly to market dynamics and better serve customers."

The formation of a new pressure pumping firm was announced on 29 November, following Baker Hughes’ failed merger attempt with fellow oilfield services provider, Halliburton Co. 

Baker Hughes and Halliburton are the second and third largest oilfield service suppliers following  market leader Schlumberger. Weatherford is also a major supplier in the sector. Both Halliburton and Baker Hughes are leading producers and providers of oilfield minerals including bentonite and barite.