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5 Energy Stocks to Buy as U.S. Rig Count Hits 10-Month High
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In its weekly release, Houston-based oilfield services company Baker Hughes Inc. reported a rise in the U.S. rig count (number of rigs searching for oil and gas in the country) – the eighteenth increase in 21 weeks. This can be attributed to addition in the tally of oil-directed rigs as commodity prices tick up and efficiencies improve.
Importantly, bulk of the gains (11 out of 20) were in the Permian Basin of West Texas, an area that continues to be profitable even at the current low oil prices.
Analysis of the Data
Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 588 for the week ended Nov 18, 2016. This was up by 20 from the previous week’s rig count and resumes the trend of recent increases that has only been snapped thrice since June. Rig counts have generally been rising during the last six months since plunging to an all-time low of 404 in May, with the addition of a flood of new units.
Despite the steady climb, the current nationwide rig count is considerably lower than the prior-year level of 757. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.
For the week under review, units engaged in land operations – which rose by 17 to 563 – were the primary reason for the gain in rig count. Meanwhile, inland waters activity was up by 1 to 2 rigs, while offshore drilling units increased by 2 to 23.
Oil Rig Count: The oil rig count – that bottomed at 316 in May 2016 – improved further (by 19) to 471. In fact, the number of active domestic oil rigs have gone up in twenty-two of the last 24 weeks. As a result of this sustained gain, the current tally is now the highest in 10 months. Nevertheless, they are well below the previous year’s rig count of 564 and only about 35% of the peak of 1,609 in Oct 2014.
Natural Gas Rig Count: The natural gas rig count – which plunged to their lowest level on record in Aug – increased for the ninth time in 12 weeks to 116 (a gain of 1 rig from the previous week). Still, as per the most recent report, the number of natural gas-directed rigs are languishing 93% below the all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 193 active natural gas rigs.
Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 1 remained unchanged from the previous week.
Rig Count by Type: The number of vertical drilling rigs increased by 7 to 66, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was up by 13 to 522. In particular, horizontal rig units jumped by 13 from last week’s level to 470 – the highest since Jan.
Gulf of Mexico (GoM): The GoM rig count was up by 2 to 23 – all searching for oil.
Conclusion: Now’s the Time to Buy: The Baker Hughes data, issued since 1944 at the end of every week, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.
This generates considerable excitement among energy investors and has long been deployed to help predict future oil and gas production. When number of rigs decline, fewer wells are drilled. This means less new oil and gas are discovered, and ultimately production slows down.
As a result, an increase or decrease in the Baker Hughes rotary rig count heavily weighs on the demand for energy services – drilling, completion, production, etc.
With the U.S. rig count continuing its upward movement, it might be a good time to add a few energy-related stocks to your portfolio.
How to Identify the Outperformers?
With a wide range of energy firms thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver attractive returns. While it is impossible to be sure about such outperformers, this is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy.
Finally, the chosen ones have VGM Score less than or equal to B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
Ultra Petroleum Corp. : Houston, TX-based Ultra Petroleum is an independent energy firm engaged in the acquisition, development, exploration and production of oil and gas properties. The company’s operations are focused on the Green River Basin of southwest Wyoming, mainly covering the Pinedale and the Jonah fields.
Braskem SA (BAK - Free Report) : Together with its subsidiaries, Braskem SA produces and sells thermoplastic resins. Headquartered in Brazil, the company is the largest petrochemical operation in Latin America.
Ocean Rig UDW LLC : Nicosia, Cyprus-headquartered Ocean Rig mainly provides services related to offshore drilling to the upstream energy players. The company’s drilling units specialize in operating in harsh-environment.
Archrock Partners L.P. : Houston, Texas-based Archrock Partners is a leading provider of natural gas contract compression services to clients spread all over U.S.
CONE Midstream Partners L.P. : Headquartered in Canonsburg, PA, CONE Midstream Partners is a master limited partnership focused on natural gas and condensate gathering in the Marcellus Shale in Pennsylvania, Ohio and West Virginia.
Zacks Rank #2
VGM Score ‘B’
Bottom Line
As per industry data, the U.S. rig count -- a proxy for activity in the sector -- is now at its highest since Jan. Therefore, this is the perfect time to indulge in some energy stocks to make sure your portfolio is perfectly oiled up!
Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>
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5 Energy Stocks to Buy as U.S. Rig Count Hits 10-Month High
In its weekly release, Houston-based oilfield services company Baker Hughes Inc. reported a rise in the U.S. rig count (number of rigs searching for oil and gas in the country) – the eighteenth increase in 21 weeks. This can be attributed to addition in the tally of oil-directed rigs as commodity prices tick up and efficiencies improve.
Importantly, bulk of the gains (11 out of 20) were in the Permian Basin of West Texas, an area that continues to be profitable even at the current low oil prices.
Analysis of the Data
Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 588 for the week ended Nov 18, 2016. This was up by 20 from the previous week’s rig count and resumes the trend of recent increases that has only been snapped thrice since June. Rig counts have generally been rising during the last six months since plunging to an all-time low of 404 in May, with the addition of a flood of new units.
Despite the steady climb, the current nationwide rig count is considerably lower than the prior-year level of 757. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.
For the week under review, units engaged in land operations – which rose by 17 to 563 – were the primary reason for the gain in rig count. Meanwhile, inland waters activity was up by 1 to 2 rigs, while offshore drilling units increased by 2 to 23.
Oil Rig Count: The oil rig count – that bottomed at 316 in May 2016 – improved further (by 19) to 471. In fact, the number of active domestic oil rigs have gone up in twenty-two of the last 24 weeks. As a result of this sustained gain, the current tally is now the highest in 10 months. Nevertheless, they are well below the previous year’s rig count of 564 and only about 35% of the peak of 1,609 in Oct 2014.
Natural Gas Rig Count: The natural gas rig count – which plunged to their lowest level on record in Aug – increased for the ninth time in 12 weeks to 116 (a gain of 1 rig from the previous week). Still, as per the most recent report, the number of natural gas-directed rigs are languishing 93% below the all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 193 active natural gas rigs.
Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 1 remained unchanged from the previous week.
Rig Count by Type: The number of vertical drilling rigs increased by 7 to 66, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was up by 13 to 522. In particular, horizontal rig units jumped by 13 from last week’s level to 470 – the highest since Jan.
Gulf of Mexico (GoM): The GoM rig count was up by 2 to 23 – all searching for oil.
Conclusion: Now’s the Time to Buy: The Baker Hughes data, issued since 1944 at the end of every week, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.
This generates considerable excitement among energy investors and has long been deployed to help predict future oil and gas production. When number of rigs decline, fewer wells are drilled. This means less new oil and gas are discovered, and ultimately production slows down.
As a result, an increase or decrease in the Baker Hughes rotary rig count heavily weighs on the demand for energy services – drilling, completion, production, etc.
With the U.S. rig count continuing its upward movement, it might be a good time to add a few energy-related stocks to your portfolio.
How to Identify the Outperformers?
With a wide range of energy firms thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver attractive returns. While it is impossible to be sure about such outperformers, this is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy.
Finally, the chosen ones have VGM Score less than or equal to B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Stocks to Invest In
Ultra Petroleum Corp. : Houston, TX-based Ultra Petroleum is an independent energy firm engaged in the acquisition, development, exploration and production of oil and gas properties. The company’s operations are focused on the Green River Basin of southwest Wyoming, mainly covering the Pinedale and the Jonah fields.
Zacks Rank #1
VGM Score ‘A’
ULTRA PETRO CP Price
ULTRA PETRO CP Price | ULTRA PETRO CP Quote
Braskem SA (BAK - Free Report) : Together with its subsidiaries, Braskem SA produces and sells thermoplastic resins. Headquartered in Brazil, the company is the largest petrochemical operation in Latin America.
Zacks Rank #1
VGM Score ‘A’
BRASKEM SA Price
BRASKEM SA Price | BRASKEM SA Quote
Ocean Rig UDW LLC : Nicosia, Cyprus-headquartered Ocean Rig mainly provides services related to offshore drilling to the upstream energy players. The company’s drilling units specialize in operating in harsh-environment.
Zacks Rank #1
VGM Score ‘A’
OCEAN RIG UDW Price
OCEAN RIG UDW Price | OCEAN RIG UDW Quote
Archrock Partners L.P. : Houston, Texas-based Archrock Partners is a leading provider of natural gas contract compression services to clients spread all over U.S.
Zacks Rank #2
VGM Score ‘B’
ARCHROCK PTNRS Price
ARCHROCK PTNRS Price | ARCHROCK PTNRS Quote
CONE Midstream Partners L.P. : Headquartered in Canonsburg, PA, CONE Midstream Partners is a master limited partnership focused on natural gas and condensate gathering in the Marcellus Shale in Pennsylvania, Ohio and West Virginia.
Zacks Rank #2
VGM Score ‘B’
Bottom Line
As per industry data, the U.S. rig count -- a proxy for activity in the sector -- is now at its highest since Jan. Therefore, this is the perfect time to indulge in some energy stocks to make sure your portfolio is perfectly oiled up!
CONE MIDSTREAM Price
CONE MIDSTREAM Price | CONE MIDSTREAM Quote
Confidential: Zacks' Best Investment Ideas
Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>