Rig Utilization Rate

DEFINITION of 'Rig Utilization Rate'

A ratio used in the oil services industry that measures the amount of rigs being used as a total percentage of a company's entire fleet. A company's rig utilization rate often speaks volumes about both a company's current prospects and the global economic landscape as well. Quite often during times of economic deflation or recession, rig utilization rates will be quite low, due to a decreased demand for oil.

BREAKING DOWN 'Rig Utilization Rate'

In most cases, the higher the rig utilization rate, the higher the revenues for a firm. During periods of growth where the demand for oil is high, rig utilization rates often run into the 90th percentile and even up to 100%. It's important to note, however, that companies that have high utlization rates are running at capacity, limiting the company's short-term capabilities to increase production and revenues should demand increase.

RELATED TERMS
  1. Bid Rigging

    A scheme in which businesses collude so that a competing business ...
  2. Price Rigging

    An illegal action performed by a group of conspiring businesses ...
  3. BP Oil Spill

    A 2010 oil spill that occurred in the Gulf of Mexico as a result ...
  4. Utilities Sector

    A category of stocks for utilities such as gas and power. The ...
  5. Day rate (oil drilling)

    In oil production, a day rate is the amount a drilling contractor ...
  6. Capacity Utilization Rate

    A metric used to measure the rate at which potential output levels ...
Related Articles
  1. Managing Wealth

    Transocean's 3 Key Financial Ratios (RIG)

    Learn about key financial ratios for Transocean. Understand how the company's aging drilling fleet could work against its future earning potential.
  2. Markets

    The Changing Economics of the Oil Business

    Read about the changing economics of the oil business. Discover how oil companies are using technology to increase the efficiency of old wells.
  3. Markets

    Baker Hughes Says Rig Counts Are Still Falling

    The dramatic slowdown in the energy sector continued in April: Oil field industry services player Baker Hughes (NYSE: BHI) has come out with its monthly report on the number of drilling rigs ...
  4. Insights

    Seadrill Stock: Analyzing 5 Key Suppliers (SDRL)

    Learn about a handful of key shipbuilding and offshore engineering companies that supply drilling rigs to Seadrill, a global contract drilling company.
  5. Markets

    Transocean, SeaDrill, Plunge on Falling Oil Prices (RIG, SDRL)

    Both firms make money supplying drilling services for oil and gas wells. As oil prices fall, it spells an ominous sign for their respective fleet of rigs.
  6. Markets

    Why Seadrill's Dividend Reinstatement Is Unlikely

    Learn why Seadrill suspended its dividend payments in the latter part of 2014, and how lower crude oil prices could hurt the company's future prospects.
  7. Markets

    Who Are Seadrill’s Main Competitors?

    Learn about some of the issues facing Seadrill and its competitors in the offshore oil drilling industry due to low commodity prices.
  8. Markets

    Transocean Stock Plunges 8.6% on Falling Oil (RIG)

    As evidenced by the 40% tumble RIG shares have witnessed in the past twelve months, volatility goes with the territory. But so do knee-jerk reactions.
  9. Markets

    What a $20 USD Barrel Means For the US Oil Industry

    Read about Goldman Sachs' prediction that oil prices could go as low as $20 a barrel. Understand how low prices impact companies in the U.S. oil sector.
  10. Markets

    Small Cap Stocks Are Feeling The Burn

    The last 12 months have been a tumultuous time in commodity and energy markets.
RELATED FAQS
  1. Why do investors consider the rig utilization rates when investing in oil and gas?

    Understand the reasons rig utilization rates are key indicators that investors use to understand the production and profit ... Read Answer >>
  2. How do the average costs compare for the different types of oil drilling rigs?

    Learn the average costs to an oil producer for purchasing either land-based or offshore oil-drilling rigs and some factors ... Read Answer >>
  3. Why are trends in rig count important to investors in the oil and gas sector?

    Determine why trends in rig counts are important to investors in the oil and gas sector. Rig count reveals how many rigs ... Read Answer >>
  4. How quickly can an oil and gas producer react to changing oil prices?

    Learn how oil and gas producers are able to quickly respond to changes in crude oil prices, and understand how the weekly ... Read Answer >>
  5. What kind of investors buy utility stocks?

    Take a look at why income investors like utilities, why value investors might like utilities and why growth investors tend ... Read Answer >>
  6. What are the main factors that drive share prices in the utilities sector?

    Learn why the share prices of companies in the utility sector have sensitivity to interest rates and to changes in the amount ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center