In its weekly release, Baker Hughes (BHGE), a GE company, reported an increase in U.S. rig count.
About the Rig Count
Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry.
A change in the Houston-based oilfield services player’s rotary rig count impacts demand for energy services like drilling, completion and production provided by the likes of Halliburton Co. (HAL - Free Report) , Schlumberger Ltd. (SLB - Free Report) , Diamond Offshore Drilling, Inc. (DO - Free Report) and Transocean Ltd. (RIG - Free Report) .
Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1048 in the week ended Aug 31, up from 1044 in the previous week. This marked an increase in rig count in five of the last 10 weeks.
Despite the rig count slipping to an all-time low of 404 in May 2016, it has been rising rapidly in U.S. shale resources. The current national rig count is considerably higher than the prior-year level of 943.
For the week under review, the rise in rig count can be attributed to increased onshore operations. The number of onshore rigs totaled 1028, up from 1025. Moreover, two rigs operated in the inland waters last week, up from one in the week ended Aug 24. The tally for offshore rigs was 18, in line with the prior week’s count.
Oil Rig Count: Oil rig count was 862, up from 860 in the week ended Aug 24. Moreover, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly higher than last year’s 759.
Natural Gas Rig Count: The natural gas rig count of 184 crossed the count of 182 for the week ended Aug 24.
Per the recent report, the number of natural gas-directed rigs is 88.5% below the all-time high of 1,606 in 2008. However, like oil, the count of rigs exploring gas is above the year-ago tally of 183.
Rig Count by Type: The number of vertical drilling rigs totaled 66 units, up from the prior week tally of 63. 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 an unit to 982.
Gulf of Mexico (GoM): The GoM rig count is 16 units, of which 14 were oil-directed. The count is in line with the week ended Aug 24.
The number of rigs exploring the United States jumped primarily on the addition of two oil rigs in the Cana Woodford Basin. One oil rig was added in the Permian basin while Marcellus witnessed the addition of a natural gas rig.
West Texas Intermediate (WTI) crude is now trading above the $70-a-barrel psychological mark. Overall, the pricing scenario is favorable for the drillers to add more rigs in the U.S. resources. Hence, we ask investors to consider energy stocks which will make valuable additions to portfolios.
Two such stocks are Denbury Resources Inc. (DNR - Free Report) and Northern Oil and Gas, Inc. (NOG - Free Report) , with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Denbury surpassed the Zacks Consensus Estimate in each of the last four quarters, the average positive earnings surprise being 162.9%.
We expect Northern Oil’s earnings to grow 250% year over year in 2018.
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