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US Oil & Gas Rig Tally Hits Record Lows for 6 Straight Weeks

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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 Falls: Rigs engaged in the exploration and production of oil and natural gas in the United States fell to an all-time low of 279 in the week through Jun 12, compared with the prior-week count of 284. The current national rig count is below the prior year’s 969.

Investors should know that with the recent all-time low mark, the tally has touched record-low levels for six successive weeks, thanks to dented global energy demand owing to the coronavirus pandemic.

The number of onshore rigs in the week ending Jun 12 totaled 266 versus the previous week’s 271. However, the tally of rigs operating offshore plays through the week till Jun 12 was 13, in line with the prior-week count. Also, no rigs operated in inland waters, same as it was in the prior week.

US Removes 7 Oil Rigs: Oil rig count was 199 in the week through Jun 12, compared with 206 in the week ended Jun 5. Notably, the tally declined for 13 consecutive weeks. Investors should also 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 788.

Natural Gas Rig Count Rises in US: The natural gas rig count of 78 is higher than the prior-week count of 76. However, the count of rigs exploring the commodity is lower than the prior-year week’s 181. Per the latest report, the number of natural gas-directed rigs is 95.1% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 11 units versus the prior-week count of seven. 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) of 268 was lower than the prior-week level of 277. 

Gulf of Mexico (GoM) Rig Count In Line: The GoM rig count is 13 units, of which all were oil-directed. The count was in line with the prior-week tally.

Rig Count in Major Basins  

Permian — the most prolific basin in the United States — saw a drop in oil rig tally by four in the week ended Jun 12. Importantly, the oil rig count dropped for 13 consecutive weeks in Permian. Moreover, with the decline in oil rig tally by one in Granite Wash, the drillers have removed all rigs from the basin.

Outlook

The price of West Texas Intermediate (WTI - Free Report) crude oil has improved significantly in the past month since global lockdown measures are easing, raising fuel demand. However, there are doubts regarding the sustained recovery in oil prices as fears of new coronavirus infections are mounting.

Most of the analysts opine that explorers may return to the shale plays if the commodity can sustain its recovery. Meanwhile, investors may consider two energy stocks expected to benefit if the oil price rally sustains like QEP Resources, Inc. (QEP - Free Report) and W&T Offshore, Inc. (WTI - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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