Baker Hughes 2015 Annual Report Download - page 35

26
In North America, natural gas prices, as measured by the Henry Hub Natural Gas Spot Price, averaged $2.61/
mmBtu in 2015, representing a 40% decrease over the prior year and the lowest annual average since 1999.
Natural gas prices began 2015 supported by a colder than normal winter but fell throughout the year as production
and storage inventories hit record levels despite a significant decline in the natural gas-directed rig count. In the
fourth quarter of 2015, above average temperatures and forecasts of a warmer winter in the U.S. drove natural gas
prices to further decline reaching a low of $1.53/mmBtu in December. According to the U.S. Department of Energy
(“DOE”), working natural gas in storage at the end of 2015 was 3,756 billion cubic feet ("Bcf"), which was 16.7%, or
536 Bcf, above the corresponding week in 2014.
Baker Hughes Rig Count
The Baker Hughes rig counts are an important business barometer for the drilling industry and its suppliers.
When drilling rigs are active they consume products and services produced by the oil service industry. Rig count
trends are governed by the exploration and development spending by oil and natural gas companies, which in turn
is influenced by current and future price expectations for oil and gas. Therefore, the counts may reflect the relative
strength and stability of energy prices and overall market activity. However, these counts should not be solely relied
on as other specific and pervasive conditions may exist that affect overall energy prices and market activity.
Baker Hughes has been providing rig counts to the public since 1944. We gather all relevant data through our
field service personnel, who obtain the necessary data from routine visits to the various rigs, customers, contractors
and/or other outside sources. We base the classification of a well as either oil or natural gas primarily upon filings
made by operators in the relevant jurisdiction. This data is then compiled and distributed to various wire services
and trade associations and is published on our website. We believe the counting process and resulting data is
reliable; however, it is subject to our ability to obtain accurate and timely information. Rig counts are compiled
weekly for the U.S. and Canada and monthly for all international rigs. Published international rig counts do not
include rigs drilling in certain locations, such as Russia, the Caspian region, Iran and onshore China because this
information is not readily available.
Rigs in the U.S. and Canada are counted as active if, on the day the count is taken, the well being drilled has
been started but drilling has not been completed and the well is anticipated to be of sufficient depth to be a potential
consumer of our drill bits. In international areas, rigs are counted on a weekly basis and deemed active if drilling
activities occurred during the majority of the week. The weekly results are then averaged for the month and
published accordingly. The rig count does not include rigs that are in transit from one location to another, rigging up,
being used in non-drilling activities, including production testing, completion and workover, or are not expected to be
significant consumers of drill bits.
The rig counts are summarized in the table below as averages for each of the periods indicated.
2015 2014 2013
U.S. - onshore 948 1,804 1,705
U.S. - offshore 36 57 56
Canada 194 379 353
North America 1,178 2,240 2,114
Latin America 319 397 419
North Sea 37 40 42
Continental Europe 80 105 93
Africa 106 134 125
Middle East 406 406 372
Asia Pacific 220 254 246
Outside North America 1,168 1,336 1,297
Worldwide 2,346 3,576 3,411