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Permian & Granite Wash Witness Fall in Oil Drilling Rig Count

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In its weekly release, Baker Hughes, a GE company (BHGE - Free Report) reported a decline in weekly rig count in the United States.  

More on 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 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) .

Details

Total U.S. Rig Count Drops:  Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1045 in the week ended Feb 1, down from the prior week tally of 1059. Notably, the tally declined in three of the last five 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 946.

The number of onshore rigs totaled 1025, down from 1038 in the previous week. Moreover, the tally for offshore activities totaled 19, down from 20 for the week ended Jan 25. Through the week ended Feb 1, one rig operated in the inland waters, in line with the prior week’s count.

U.S. Removes 15 Oil Rigs: Oil rig tally was 847, down from 862 in the week ended Jan 25. This marked a decline in four of the prior five weeks.

Nevertheless, the current total, far from the peak of 1,609 attained in October 2014, is higher than the tally of 765 a year ago.  

Natural Gas Rig Count Rises in the United States: The natural gas rig count of 198 is higher than the count of 197 for the week ended Jan 25.

Moreover, like oil, the count of rigs exploring the commodity is above the prior-year quarter’s 181. 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 63 units, down from the previous week’s tally of 68. Further, 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 by nine units to 982.

Gulf of Mexico (GoM) Rig Count Declines: The GoM rig count is 19 units, of which 15 were oil-directed. The count was lower than the tally of 20 for the week ended Jan 25.

Conclusion

Three oil rigs were removed from each of Permian & Granite Wash, dragging down the weekly rig count.

It is to be noted that Schlumberger during its quarterly results announcement revealed that explorers and producers are getting more conservative about investing owing to volatile oil prices. Conservative investments in upstream activities might affect demand for rigs. Hence, drillers may continue to lower rigs count in the coming weeks.

Despite the pessimism, there are a couple of upstream energy players like Concho Resources Inc (CXO - Free Report) and Apache Corporation (APA - Free Report) that investors could keep an eye on. Both the stocks 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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