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Cana Woodford & Mississippian Witness Decline in Oil Rigs

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In its weekly release, Baker Hughes, a GE company (BHGE) reported a drop 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 player’s rotary rig count affects demand for energy services like drilling, completion and production provided by the likes of Halliburton Company (HAL - Free Report) , Schlumberger Ltd. (SLB - Free Report) , Diamond Offshore Drilling, Inc. (DO - Free Report) and Transocean Ltd. (RIG - Free Report) . 

Details

Total U.S. Rig Count Decreases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1026 in the week ended Mar 15, down from the prior week tally of 1027. This marked a decline in the count for four weeks in a row.  

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 990.

The number of onshore rigs totaled 1001, down from 1004 in the previous week. However, the tally for offshore activities totaled 22, in line with the prior week. Three rigs operated in the inland waters, up from the count of one in the prior week.  

U.S. Removes One Oil Rig: Oil rig tally was 833, down from 834 in the week ended Mar 8. With this, the tally for oil drilling rigs fell to the lowest mark since April 2018.

However, the current total, far from the peak of 1,609 attained in October 2014, is higher than 800 a year ago. 

Natural Gas Rig Count Flat in the United States: The natural gas rig count of 193 is in line with the tally for the week ended Mar 8.  

Moreover, like oil, the count of rigs exploring the commodity is above the prior-year quarter’s 189. Per the latest report, the number of natural gas-directed rigs is almost 88% below the all-time high of 1,606 hit in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 54 units, down from the previous week’s tally of 56. 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 an unit to 972.

Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count is 22 units, of which 18 were oil-directed. The count was in line with the prior week’s tally.

Conclusion

Five oil drilling rigs were removed from Cana Woodford basin while Mississippian basin witnessed the removal of three oil rigs, resulting in the drop in weekly rig count.

Investors should note that oil prices are likely to fall in 2019 from the prior year. Owing to this, explorers and producers have decided to lower capital expenditure in 2019. Thus, conservative investments in upstream activities might affect demand for rigs. Hence, drillers may continue to lower oil rig 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 Corp. (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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