Rig Utilization Rate

AAA

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. Organic Reserve Replacement

    Oil reserves that an oil company acquires by exploration and ...
  2. Recoverable Reserves

    A term used in natural resource industries to describe the amount ...
  3. Organization Of Petroleum Exporting ...

    An organization consisting of the world's major oil-exporting ...
  4. Personal Finance

    All financial decisions and activities of an individual, this ...
  5. Prime Rate

    The interest rate that commercial banks charge their most credit-worthy ...
  6. Barrels Per Day - B/D

    A measure of oil output, represented by the number of barrels ...
Related Articles
  1. Economics

    Peak Oil: What To Do When The Wells Run Dry

    Find out how to invest and protect your investments in this slippery sector.
  2. Forex Strategies

    Canada's Commodity Currency: Oil And The Loonie

    When the price of oil goes up, don't worry about how much gas is going to cost - get even by making a play on the Canadian dollar.
  3. Active Trading

    What Determines Oil Prices?

    Changes in the price of oil aren't arbitrary. Read on to find out what moves them and why.
  4. Forex Education

    A Primer On Offshore Drilling

    Learn the important ratios and terms that you'll need to know to get involved in this trading sector.
  5. Options & Futures

    Peak Oil: Problems And Possibilities

    Learn a little more about the "non" part of this nonrenewable resource.
  6. Budgeting

    Understanding Oil Industry Terminology

    The drillers are just one aspect of the oil & gas industry, and by knowing some details of their role, you'll be better suited to make investment decisions.
  7. Active Trading

    Oil As An Asset: Hotelling's Theory On Price

    Not sure where oil prices are headed? This theory provides some insight.
  8. Active Trading

    How Does Crude Oil Affect Gas Prices?

    Find out how this commodity's fluctuating price affects more than just how much you pay at the pump.
  9. Economics

    Meet OPEC, Manager Of Oil Wealth

    This organization's decisions can influence oil prices, but there is a limit to its power.
  10. Economics

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
RELATED FAQS
  1. How much inventory space is available in the United States to store oil?

    There is enough working storage capacity for oil inventory in the United States to accommodate approximately 520 million ... Read Full Answer >>
  2. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  4. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  5. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  6. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!