In its latest weekly release, Houston-based oilfield services company Baker Hughes Inc. BHI reported another rise in the U.S. rig count (number of rigs searching for oil and gas in the country) – the twentieth straight periodical increase. This can be attributed to addition in the tally of oil-directed rigs as U.S. shale producers continue to ramp up production.
In fact, as per the U.S. Energy Department's latest inventory release, at 9.342 million barrels a day, current crude output is up approximately 7% from the year-ago period and are at levels not seen since Aug 2015.
About the Baker Hughes Weekly Rig Count Report
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.
Analysis of the Data
Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 916 for the week ended June 2, 2017. This was up by 8 from the previous week’s count and continues the trend of increases that has only been snapped four times during the past 1 year.
Since plunging to an all-time low of 404 in May 2016, rig counts have generally been rising over the past 12 months, with the addition of a flood of new units into a seemingly stable crude price environment hovering in a range around $50 per barrel. This steady climb has catapulted the current nationwide rig count to more than double the prior-year's reading of 408.
Oil Rig Count: The oil rig count – accounting for some 80% of the total number of active domestic rigs – improved further (by 11) to 733. The largest gain came in West Texas’ Permian Basin, which now accounts for 364 rigs, or half of all the nation’s oil rigs.
With the Permian shale producing region continuing to see large increases in the rig count, the number of active domestic oil units have gone up for 5 months in a row. As a result of this sustained gain, the current tally is now the highest since Apr 2015. Moreover, they are significantly above the previous year’s rig count of 325.
Conclusion: A Good Time to Add Oil Service Stocks
The Baker Hughes data generates considerable excitement among energy investors and has long been deployed to help predict future oil and gas production. When number of rigs increase, as is the case now, additional wells are drilled. This means new oil and gas are discovered, and ultimately production picks up.
In essence, a rise in the Baker Hughes rotary rig count positively weighs on the demand for energy services – drilling, completion, production, etc. At this juncture, adding a few of these stocks to your portfolio might as well make for a prudent option.
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.
Below we share with you four energy services firms each of which have earned a highly desirable Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
C&J Energy Services Inc. (CJ - Free Report) : Houston, TX-based C&J Energy Services offers services related to completion and production to the energy industry in North America.
Flotek Industries Inc. (FTK - Free Report) : Headquartered in Houston, TX, Flotek Industries provides a range of products and services to enhance returns for the oil and gas finders.
RPC Inc. (RES - Free Report) : Based in Atlanta, GA, RPC provides a broad range of specialized services – including pressure pumping and coiled tubing – to independent oil and gas explorers throughout the U.S.
CGG : A geoscience company, Paris, France-based CGG is a provider of variety of technologies, services and equipment to exploration and production firms.
As per industry data, the U.S. rig count -- a proxy for activity in the sector -- is now at its highest in more than two years. Therefore, this is the perfect time to indulge in some energy services stocks to make sure your portfolio is perfectly oiled up!
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