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Haynesville Shale Play Sees Decline in Natural Gas Rigs

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In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company (BHGE - Free Report) , reported a decrease in total rig counts in the United States.  

About the Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, helps energy service providers gauge the overall business environment of the oil and gas industry.

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

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 929 in the week ended Dec 29 — lower than the prior week’s 931. This marked a decrease after the tally increased for the week ended Dec 22.

Since it slipped to an all-time low of 404 last May, rig count has been rising rapidly in U.S. shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 658.

For the week in discussion, the fall in rig count can be attributed to decreased onshore and offshore operations. The number of onshore rigs were 909, lower than 910. The tally for offshore was 18, down from 19.

Two rigs operated in the inland waters last week, in line with the count for the week ended Dec 22.

Oil Rig Count: Oil rig count of 747 was in line with the count for the week ended Dec 22. Further, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 525. 

Natural Gas Rig Count: The natural gas rig count of 182 was down from 184 for the week ended Dec 22. This marked a decrease after the tally increased for two consecutive weeks.

However, like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 132.  

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 of 65 units increased from 64. However, 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) declined by three units to 864.

Gulf of Mexico (GoM): The GoM rig count is at 18 units — 14 of which were oil-directed — down from 19 for the week ended Dec 22.

Conclusion

The number of rigs exploring natural gas in the United States decreased, while the count of rigs searching for oil remained the same. Naturally, the total oil and gas rig count fell, primarily supported by the removal of two rigs in Williston basin. One rig, exploring natural gas, was also removed from the Haynesville shale play.   

Crude pricing scenario has been healthy after the OPEC members agreed to extend the production curb deal beyond first-quarter 2018. Given that oil crossed the $60-per-barrel mark, we believe that there is considerable opportunity for U.S. shale players to ramp up drilling activities.

Two energy stocks that should make valuable additions to your portfolio are Northern Oil and Gas, Inc. (NOG) and Approach Resources, Inc. (AREX). Northern Oil and Gas sports a Zacks Rank #1 (Strong Buy), while Approach Resources carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Minnetonka, MN, Northern Oil and Gas is primarily engaged in exploration and development activities. We expect the company to see year-over-year revenue growth of almost 48% in 2017.

Headquartered in Fort Worth, TX, Approach Resources explores oil and gas resources in the domestic shale plays. The company is likely to witness year-over-year earnings growth of 67% in 2017.

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