Baker Hughes Incorporated (NYSE:BHI) released its monthly rig count report this morning. Compared with November counts, drilling rigs in North America are off about 9%. Compared with December 2007, North American rigs are down by just 28, about 1%.
Rig counts internationally have grown since the end of 2007, but havebeen falling steadily since mid-2008. The pullback will put pressure onrevenues at companies like Baker Hughes and other oil field servicescompanies.
The recent jump in crude prices was due almost entirely to fear ofsupply disruption caused by the conflict between Israel and Hamas, aswell as OPEC’s announced production cuts. But the reality of the globaleconomic slowdown, which has cut and will continue to cut demand foroil, has taken back virtually all the fear premium.
Lower rig counts lead to layoffs in the oil field services industry,and lower profits all around. None of this is likely to change untileconomic conditions improve.
Paul Ausick
January 9, 2009
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