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Cana Woodford & Barnett Plays Witness Higher Drilling Rigs

Zacks Equity Research
The addition of four rigs in Cana Woodford shale and two rigs in the Barnett shale play supports the rise in total count of rig, exploring for oil and gas, in the United Sates.

In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company BHGE, reported an increase in total rig counts in the United States.

About the Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, helps energy service providers gauge the overall business environment of the oil and gas industry.

Change in Baker Hughes’ rotary rig count dents demand for energy services like drilling, completion and production provided by the likes of Halliburton Company HAL, Schlumberger Ltd. SLB, Weatherford International plc WFT, Diamond Offshore Drilling, Inc. DO and Transocean Ltd. RIG.

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 931 in the week ended Dec 22 — higher than the prior week’s 930. This marked an increase after the tally declined for the week ended Dec 15.

Since it slipped to an all-time low of 404 in last May, rig count has been rising rapidly in U.S. shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 653.

For the week in discussion, the rise in rig count can be attributed to increased onshore operations. The number of onshore rigs were 910, higher than 909. The tally for offshore and inland activities remained in line with the count for the week ended Dec 15.

Two rigs operated in the inland waters last week, while 19 rigs worked offshore.

Oil Rig Count: Oil rig count of 747 was in line with the count for week ended Dec 15. Further, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 523.

Natural Gas Rig Count: The natural gas rig count — which plunged to its lowest level last August — of 184, was up from 183 for the week ended Dec 15. Moreover, like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 129.

Per the most recent report, the number of natural gas-directed rigs is nearly 89% below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs of 64 units increased from 60. However, the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) decreased by three units to 867.

Gulf of Mexico (GoM): The GoM rig count is at 19 units — 15 of which were oil-directed — in line with the count for the week ended Dec 15.

Conclusion

The number of rigs exploring natural gas in the United States has increased, while the count of rigs searching for oil remained the same. Naturally, the total oil and gas rig count has increased, primarily supported by the addition of four rigs in Cana Woodford shale and two rigs in the Barnett shale play. One rig was added in each of Permian and Williston basins, respectively.

Overall crude pricing scenario has been healthy after the OPEC members agreed to extend the production curb deal beyond first-quarter 2018. Also, natural gas price recovered from historical low mark, touched last year.

Two energy stocks that should make valuable additions to your portfolio are Northern Oil and Gas, Inc. NOG and Approach Resources, Inc. AREX. Northern Oil and Gas sports a Zacks Rank #1 (Strong Buy), while Approach Resources carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Minnetonka, MN, Northern Oil and Gas is primarily engaged in exploration and development activities. We expect the company to see year-over-year revenue growth of almost 48% in 2017.

Headquartered in Fort Worth, TX, Approach Resources explores oil and gas resources in the domestic shale plays. The company is likely to witness year-over-year earnings growth of 67% in 2017.

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Weatherford International PLC (WFT) : Free Stock Analysis Report
 
Schlumberger N.V. (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Northern Oil and Gas, Inc. (NOG) : Free Stock Analysis Report
 
Approach Resources Inc. (AREX) : Free Stock Analysis Report
 
Baker Hughes Incorporated (BHGE) : Free Stock Analysis Report
 
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