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Oil Rigs Continue to Fall as Drillers Trim Capital Spending

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In its weekly release, Houston-based oilfield services Baker Hughes, a GE company (BHGE - Free Report) , reported a decline in rigs searching for crude and natural gas in the country.  


Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 940 in the week ended Aug 25 – lower than the previous week’s 946. This shows that the total rig count in the country has declined for four weeks in a row.

Since it hit an all-time low of 404 last May, rig count has been rising rapidly in American shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 489.

For the week in discussion, the decline in rig count can be attributed to lower onshore activities.

Rig count in the onshore business fell by seven units, while units engaged in offshore operations increased slightly to 17 counts from 16 in the prior week.   

Oil Rig Count: Oil rig count fell by four to 759. This emphasizes that the rigs exploring for crude has decreased four times in the last six weeks. However, the current tally, though far off from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 406.  

Natural Gas Rig Count: The natural gas rig count – which plunged to its lowest last August – fell by two units to 180. Like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 81. As per the most recent report, the number of natural gas-directed rigs is nearly 89%, below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs fell by two units to 64, 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 down by four to 876.

Gulf of Mexico (GoM): The GoM rig count went up to 17 units – 15 of which were oil-directed – from 16 counts.    

Details of the Weekly Rig Count

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.

Change in Baker Hughes’ rotary rig count weighs heavily on the demand for energy services – drilling, completion, production, etc. – provided by companies like Halliburton Company (HAL - Free Report) , Schlumberger Limited (SLB - Free Report) , Weatherford International plc (WFT - Free Report) , Diamond Offshore Drilling, Inc. (DO - Free Report) and Transocean Ltd. (RIG - Free Report) . 


The number of rigs searching for oil and natural gas in the United States slipped from the prior week. This shows that oil and gas explorers have started lowering capital spending with an aim to combat crude glut. 

Two prospective oil stocks that could be included in your portfolio include Range Resources Corporation (RRC - Free Report) and Lonestar Resources US (LONE - Free Report) .  Both the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Fort Worth, TX, Range Resources is an independent oil and gas company, engaged in the exploration, development and acquisition of U.S. oil and gas resources. We expect year-over-year earnings growth of almost 1,492.3% for Range Resources in 2017. 

Headquartered in Fort Worth, TX, Lonestar explores oil and gas resources in the United States. The company is expected to witness 79.7% year-over-year earnings growth in 2017.

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