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Colorado, Louisiana & Texas Witness Rise in Onshore Rigs

Zacks Equity Research
The number of rigs exploring in the U.S. resources increases for two consecutive weeks.

In its weekly release, Baker Hughes BHGE, a GE company reported a rise in the U.S. rig count.

About 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 impacts demand for energy services like drilling, completion and production provided by the likes of Halliburton Company HAL, Schlumberger Limited SLB, 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 1054 in the week ended Jul 13, up from the prior week’s figure of 1052. This marked an increase for two consecutive 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 considerably higher than the prior-year level of 952.   

For the week under review, the rise in rig count can only be attributed to increased onshore and inland water operations. The number of onshore rigs totaled 1030, up from 1029. Also, the number of rigs operating in the inland waters was five last week, higher than four for the week ended Jul 6.

The tally for offshore rigs was recorded at 19, in line with the prior week’s count.

Oil Rig Count: Oil rig count was 863, in line with the figure recorded in the week ended Jul 6. Moreover, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly higher than last year’s 765.    

Natural Gas Rig Count: The natural gas rig count was recorded at 189, up from 187 for the week ended Jul 6.

Per the latest report, the number of natural gas-directed rigs is 88.2% below the all-time high of 1,606 recorded in 2008. However, like oil, the count of rigs exploring gas is above the year-ago tally of 187.

Rig Count by Type: The number of vertical drilling rigs totaled 56 units, up from the prior week tally of 55. 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) rose by one unit to 998.

Gulf of Mexico (GoM): The GoM rig count is 19 units — of which 16 rigs were oil-directed — up from 18 for the week ended Jul 6.

Conclusion

The number of rigs exploring in the United States increased, primarily due to the addition of a land rig in each of Colorado, Louisiana and Texas.

West Texas Intermediate (WTI) crude is trading above the $70-a-barrel psychological mark. As of now, worries of intensifying trade war tensions between the United States and China have gripped the energy market, keeping investors in the dark regarding the direction of commodity prices. Also, the uncertainty of whether the higher oil output from Saudi Arabia and Russia will be able to offset global supply concerns emanating from Venezuela’s supply, and Iran’s sanction issues has resulted in crude price volatility. It is to be noted that the resumption of Libyan crude export has partially offset the concern of tight oil supply in the world.

Despite the uncertainties, oil price is trading at a healthy level, making the business scenario favorable for drillers.     

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Schlumberger Limited (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
 
Anadarko Petroleum Corporation (APC) : Free Stock Analysis Report
 
Whiting Petroleum Corporation (WLL) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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