Watch the Rig Count For Jobs to Return

Mark Twain once said, “History seldom repeats but it often rhymes.”  I am using that philosophy to help determine how long the current downturn in the oil and gas industry could last. Everybody has their opinion but no one really knows for sure.  The best we can do is look at previous downturns in order to make future predilections which is what I intend to do in this article.

There are two historical numbers that we can take a look at to help us determine where we are in this current downturn and how long it will last.  Global oil supplies and the North American rig count.  The reason for the current downturn in the industry is simple.  There is too much oil.  You can argue the reasons why we have an oversupply but until demand outpaces supply, we will continue to see rig count drop.

In this article, I am going to look at the last 4 major market downturns (1998-99; 2001-02; 2008-09; and current) where the rig count dropped by at least 40%

1997 Rig Count Losses

Coming out of the crash of the 1980’s, the development of new technologies by the oil and gas industry in the 1990’s, a new boom was created and the industry experienced revitalized growth.   Like all downturns, this one started because of an oversupply of oil due partially to the rapid advancements in technology and deep water drilling coupled with decreased demand, primarily in Asia.  By the end of the decade, drilling depths in the Gulf of Mexico increased by nearly 5 times the depth from the decade before.  Advances in other “smart” technologies, drilling techniques and 3-d seismic also made drilling for oil more economical.  Coupled with decreased demand in Asia, the price of oil started to plummet in the late 1990’s and closed the decade below $10 per barrel.  September 5th, 1997, the North American rig count had peaked at 1,032 rigs.  What followed was about 3 months of volatility in the industry and then in December, rigs started shutting down as the price of oil began to collapse.  The decline (the longest of the 4) took 15 months and bottomed out at 488 rigs on April 23, 1999.  As the rest of the country was starting to go through the dot com collapse, the price of oil started to increase along with the rig count.  It took three years to recover to its previous high.

2001 Rig Count Losses

In 2001, a weakened US economy and increases in non-OPEC production put downward pressure on prices. In order to try to stabilize the fall in prices, OPEC instituted a series of reductions in member quotas cutting 3.5 million barrels by September 1, 2001. In the absence of the September 11, 2001 terrorist attacks, this may have been sufficient to moderate or even reverse the downward trend.  In the wake of the attack, crude oil prices plummeted.

July 13th, 2001, the North American rig count peaked at 1,293 rigs and what followed was a sharp decline as rigs started to shut down.  The market bottomed out just 10 months later on April 5th 2002 but it took almost 4 years to recover from it’s previous highs on March 11, 2005.  What followed was a 6 year run which culminated on September 5th, 2008.

2008 Rig Count Losses

The collapse that no one saw coming.  As the world headed into recession in 2008 coupled with the global financial collapse, the rig count seemed to collapse overnight.  On September 5th, 2008, the North American rig count had risen to heights not seen since the 1970’s.  We peaked at 2,018.  What followed was a 56.5% drop in the rig count that bottomed 9 months later.  We have never recovered to the rig count highs of 2008 although we came close in 2011 at 2,001 rigs.

Current Rig Count Losses

The current downturn started on September 26th of last year when our rig count stood at 1,931.  Since then, we have lost rigs every week (with the exception of this week when we added 2 rigs).  The North American rig count now stands at 859 rigs, a 44.5% drop.

Global Oil Supply

On average, the rig counts bottomed out after 11 months during the last 3 downturns.  The ’97 downturn was the longest (19 months), while the ’01 and ’08 downturns lasted 9 months each.  According to the law of averages, we can expect to bottom out later this summer around August.  If we hold fast to an August time frame, then we should start to see a drop in global oil supplies.  The problem lies in the middle east.  Even though the US rig count has dropped dramatically, Middle East producers are maintaining rig counts and production levels near all time highs.

Graph courtesy of  IEA.

Graph courtesy of IEA.













Tim Cook is the President and Founder of PathFinder Staffing, an oil and gas recruiting agency located in Houston, Texas. He has been a oil and gas recruiter since 1995. To talk to one of our oil and gas recruiters about your job search or your hiring needs, visit our web site at or call us at (281) 858-7325.

Print Friendly, PDF & Email
  • 26 Jun, 2015
  • Tim Cook

Share This Story