In its weekly release, Baker Hughes, a GE company (BHGE - Free Report) reported a decline in the U.S. rig count.
More on the Rig Count
Baker Hughes’ data, issued at the end of every week since 1944, facilitates 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 affects demand for energy services like drilling, completion and production provided by companies like Halliburton Company (HAL - Free Report) , Schlumberger Limited (SLB - Free Report) , Diamond Offshore Drilling, Inc (DO - Free Report) and Transocean Ltd. (RIG - Free Report) .
Total U.S. Rig Count Decreases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1075 in the week ended Jan 4, down from 1083 in the prior week. This marks a fall in rig count in five of the past seven weeks.
Despite 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 higher than the prior-year quarter’s level of 924.
For the week under review, the downside has been caused by reduced onshore and offshore operations. The number of onshore rigs totaled 1050, down from 1056 in the previous week. Moreover, the tally for offshore activities totaled 22, down from 24 for the week ended Dec 28. However, through the week ended Jan 4, three rigs operated in the inland waters, in line with the prior week’s count.
U.S. Removes Eight Oil Rigs: Oil rig tally was 877, down from 885 in the week ended Dec 28.
Nevertheless, the current total, far from the peak of 1,609 attained in October 2014, is higher than the tally of 742 a year ago.
Natural Gas Rig Count Flat in the United States: The natural gas rig count of 198 is in line with the count for the week ended Dec 28.
Moreover, like oil, the count of rigs exploring the commodity is above the prior-year quarter’s number of 182. Notably, per the recent report, the number of natural gas-directed rigs is almost 88%, below the all-time high of 1,606 in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 64 units, down from the previous week’s tally of 68. Moreover, 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) fell four units to 1,011.
Gulf of Mexico (GoM) Rig Count Declines: The GoM rig count is 22 units, of which 18 were oil-directed. The count was lower than the tally of 24 for the week ended Dec 28.
Five onshore rigs were removed from California, while Louisiana witnessed the removal of two offshore rigs, primarily lowering the weekly rig count.
After plummeting below $45-a-barrel, the price of West Texas Intermediate (WTI) crude is approaching $50, backed by optimism from trade talks between China and the United States that could strengthen global demand.
Notably, the weak crude pricing scenario has not made any significant impact on the U.S. shale drillers as with the advancement of technologies, well costs have declined drastically. Since, breakeven oil price in the Permian play is lower than $30 a barrel — per Pioneer Natural Resources Company (PXD) — it will be a wise decision to keep a track on drillers operating in the prolific resource. Two such upstream stocks are Diamondback Energy, Inc (FANG - Free Report) and Concho Resources Inc (CXO - Free Report) . The firms carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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