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US Oil Rig Tally Falls to Lowest Mark in More Than 3 Years

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In its weekly release, Baker Hughes Company (BKR - Free Report) reported a drop in the U.S. rig count.

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 service 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 Limited (SLB - Free Report) , Diamond Offshore Drilling, Inc (DO - Free Report) and Transocean Ltd. (RIG - Free Report) .

Details

Total US Rig Count Decreases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 602 in the week through Apr 9, compared with the prior-week count of 664. The current national rig count is also below the prior year’s 1022.

The number of onshore rigs, in the week ending Apr 9, totaled 584 versus the previous week’s 646. However, the tally of rigs operating offshore plays through the week till Apr 9 was 18, in line with the prior-week count. Moreover, no rigs operated in inland waters, same as it was in the prior week.

US Removes 58 Oil Rigs: Oil rig count was 504 in the week through Apr 9, compared with 562 in the week ended Apr 3. Importantly, since crude prices are in the bearish territory, explorers are cutting their capital budget considerably. This led the weekly tally of oil rigs to fall to the lowest mark since December 2016. Notably, among the upstream energy players in North America that recently decided to lower their capital budget for 2020 are Occidental Petroleum Corporation (OXY - Free Report) and Marathon Oil Corporation (MRO - Free Report) . Marathon Oil currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors should note that the current tally of oil rigs, far from the peak of 1,609 attained in October 2014, is also below the year-ago 833.

Natural Gas Rig Count Declines in US: The natural gas rig count of 96 is lower than the prior-week count of 100. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 189. Per the latest report, the number of natural gas-directed rigs is 94% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 22 units, lower than the prior-week count of 30. 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) of 580 was lower than the prior-week level of 634. 

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

Rig Count in Major Basins & Outlook

Permian — the most prolific basin in the United States — saw a drop in oil rig tally by 35 in the week ended Apr 9. Importantly, the count of oil rigs in Permian dropped for four consecutive weeks. Moreover, drillers in the Eagle Ford shale play lowered oil rig count by six. 

Notably, domestic drillers may continue to lower rigs in oil patches since global energy demand declined drastically owing to the coronavirus pandemic. Importantly, crude’s world-wide demand is so bleak that the recent agreement to cut roughly 10% of global production volumes by several oil producing nations could not pull oil out of the bearish territory.

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