Testing Rig Count Trends After the Gulf Oil Spill (BHI, OIH, USO, BP, RDS-A)

The rig count from Baker Huges Inc. (NYSE:BHI) is out for April and the recent trends continue. The US count is up, the Canadian count is down, and the international rig count is flat. So far today, the Oil Services HOLDRs (NYSE: OIH) and the United States Oil (NYSE: USO) ETFs are off 1%-2%, likely due to falling crude prices and a very negative broad market ticker tape.

Offshore rig counts were higher in the US and internationally, which is ironic given the disaster BP plc (NYSE: BP) faces in the Gulf of Mexico. In the US, offshore rigs grew by 3 month-over-month and by 5 compared with last year. Offshore rig counts have nowhere to go but down in the US for at least the next few weeks because the federal government has halted new permits until the end of May.

The moratorium on permits extends beyond the Gulf, and includes permits that are pending for offshore Alaska. The most direct impact on Alaska drilling will be to Royal Dutch Shell plc (NYSE:RDS-A), which has applied for permits for exploration wells in the Chukchi and Beaufort Seas. The Department of Interior earlier put a hold on its plans to offer leases for sale off the coast of Virginia.

Shares of Baker Hughes are fluctuating right near the stock’s opening price of $45.95.  It is going to be interesting to see if the active rig count can stay up after the most recent disaster.

Paul Ausick

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