In its weekly release, Baker Hughes (BHGE - Free Report) — a GE company — reported in-line 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 players’ rotary rig count impacts demand for energy services like drilling, completion and production provided by the likes of Halliburton Company (HAL - Free Report) , Schlumberger Limited (SLB - Free Report) , Diamond Offshore Drilling, Inc. (DO - Free Report) and Transocean Ltd. (RIG - Free Report) .
Weekly Summary: Rigs engaged in exploration and production of oil and natural gas in the United States totaled 1048 in the week ended Sep 7, matching the previous week’s tally. Notably, the rig count increased in five of the last 10 weeks’ calculation.
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 944.
For the week under review, the rig count for onshore operations decreased but the figure from the offshore and inland activities rose.
The number of onshore rigs totaled 1026, down from 1028. However, the tally for offshore rigs was 19, up from the prior week’s count of 18. Also, three rigs operated in the inland waters last week, up from two in the week ended Aug 31.
Oil Rig Count: Oil rig count was 860, down from 862 in the week ended Aug 31. However, the current total, though far from the peak of 1,609 attained in October 2014, is significantly higher than last year’s 756.
Natural Gas Rig Count: The natural gas rig count of 186 crossed the count of 184 for the week ended Aug 31.
Per the recent report, the number of natural gas-directed rigs is 88.4%, below the all-time high of 1,606 in 2008. Moreover, unlike oil, the count of rigs exploring gas lies below the year-ago tally of 187.
Rig Count by Type: The number of vertical drilling rigs totaled 65 units, down from the previous week’s tally of 66. However, the horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations also known as shale formations) increased by one unit to 983.
Gulf of Mexico (GoM): The GoM rig count is 17 units, of which, 15 were oil-directed. The count is higher than the tally of 16 for the week ended Aug 31.
The number of rigs explored in Louisiana and Wyoming grew while the same in New Mexico, Oklahoma and Utah fell. In Louisiana, two onshore rigs and one offshore rig were added. Moreover, Wyoming witnessed the addition of a couple of land rigs. Two onshore rigs were removed, each from New Mexico and Oklahoma. Moreover, from Utah, one onshore rig was removed, keeping the total count of rigs in the United States in line.
The decline in the count of rig exploring oil in the United States partially backed the surge in West Texas Intermediate (WTI) crude. The sanction by the United States on the export of Iranian oil, which is likely to get implemented on Nov 4, is also backing this crude rally.
Overall, the commodity pricing scenario is still favorable for drillers given that oil price is approaching the $70-a-barrel psychological mark, partially offsetting the domestic pipeline bottleneck problem. Hence, we ask investors to consider energy stocks, which will make valuable additions to their portfolios. Two such investor-friendly 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 skyrocket 250% year over year in 2018.
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