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Texas & North Dakota Witness Increase in Onshore Rig Count

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In its weekly release, Baker Hughes, a GE company (BHGE - Free Report) , reported an increase in total rig count 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 this Houston-based oilfield services player’s rotary rig count hampers demand for energy services like drilling, completion and production provided by the likes of 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) .      

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 984 in the week (ended Mar 9) — higher than the prior week’s 981. Notably, the total count increased for five in the prior seven weeks.

Since it slipped to an all-time low of 404 in May 2016, 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 768.

For the week in discussion, the rise in rig count can be attributed to higher onshore operations. The number of onshore rigs totaled 967, higher than 963. Four rigs operated in the inland waters last week, in line with the count for the week ended Mar 2.  

However, the tally for offshore was 13, down from 14 in the prior week.

Oil Rig Count: Oil rig count of 796 was down from 800 for the week ended Mar 2. However, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 617.

Natural Gas Rig Count: The natural gas rig count of 188 was up from 181 for the week ended Mar 2. With this, the tally increased four times in the last five weeks.

Moreover, like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 151.  

Per the recent report, the number of natural gas-directed rigs is 88.3% below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs of 61 units increased from 59 units. Moreover, 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) increased by 1 unit to 923 units.

Gulf of Mexico (GoM): The GoM rig count is at 13 units — 12 of which were oil-directed — compared with 14 units for the week ended Mar 2.

Conclusion

The number of total rigs exploring in the United States increased, courtesy of the addition of seven onshore rigs in Texas. Three onshore rigs were also added in North Dakota.

Although rigs exploring crude fell last week but the favorable oil pricing scenario could ramp up crude drilling activities in the coming weeks. Oil has been trading mostly over the $60-per-barrel mark since January, after the OPEC members agreed to extend the production curb deal beyond first-quarter 2018.

Two energy stocks that should make valuable additions to your portfolio are Continental Resources, Inc. (CLR - Free Report) and Concho Resources Inc. (CXO - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Oklahoma City, OK, Continental is primarily an upstream energy player. We expect the company to witness year-over-year earnings growth of 323.5% in 2018.

Headquartered in Midland, TX, Concho explores oil and gas resources in the prospective plays. The company is likely to witness year-over-year earnings growth of 73.2% in 2018.

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