Focus on
US Rig Count

If you’ve been keeping up with the price of oil recently, you’ve noticed that there has been a huge drop in value.   While the market is working out the true price of oil, the focus on US Rig Count has intensified.   Baker Hughes releases rig count information that let’s the market know whether the count is moving up or down.   While Baker Hughes is just one provider of rigs within the United States, the information they provide services as a baseline for the focus on US Rig Count.

Why is rig count so important?  Rig count is an excellent indicator of activity within oil and gas.  When rig count is high, it means that investment dollars are pouring in, new jobs are being created, and new exploration is taking place.    When rig count is low, dollars are flowing away from oil and gas and we’re losing jobs.    The reason to focus on US Rig Count is because it will help you better understand where the market is today and where it will be in the future.

US Rig Count and Jobs

A quick look at rig count shows that numbers are quickly declining.  What does that mean for oil and gas jobs?  It means that less activity is taking place for drilling and completing wells.  There are numerous jobs tied to rig activity.  You have drilling and completion engineers, rig crews, technical crews, service companies who assist in operations, and various consultants.  When the rig count declines, that means some of those jobs are no longer necessary.  Without drilling rigs, those jobs no longer exist and oil and gas companies no longer need that work to be done.    We’ve already seen the job cuts beginning and this is likely just the beginning.

US Rig Count affect on Mineral Owners

With the rig count quickly dropping, what affect does this have on mineral owners?

One of the mistakes that many mineral owners make is assuming that the price of their mineral rights will always increase in value.  We’ve spoken to a lot of mineral owners who have an offer on the table to sell mineral rights for fair market value, but decline because they think it’s worth more.

We spoke to a mineral owner just 6 weeks ago who had an offer on the table for $9,000/acre.   He had heard others were getting $10,000/acre and didn’t want to sell unless he could get the same price.    We just heard from him last week and he was kicking himself because that offer for $9,000/acre was no longer available.   In his situation, the most he was able to get was just $6,750/acre based on the price of oil today.     As you can see, the price of your mineral rights can quickly shift with the price of oil!

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