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Drillers in Permian & DJ-Niobrara Basins Remove Oil Rigs

Zacks Equity Research

Baker Hughes, a GE company BHGE reported a decline in the 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 service player’s rotary rig count affects 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

Total US Rig Count Declines: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 916 in the week through Aug 23, lower than the prior-week count of 935. The current national rig count is also below the prior year’s 1044.

The number of onshore rigs, in the week ending Aug 23, totaled 887 versus the previous week’s 907. However, the tally of rigs operating offshore plays through the week till Aug 23 was 28, higher than the prior week’s 27. Notably, one rig operated in inland waters, in line with the count through the week ended Aug 16.

US Removes 16 Oil Rigs: Oil rig count was 754, down from 770 in the week ended Aug 16. This shows that drillers have removed most rigs since the week through Apr 26. Importantly, in the past eight weeks, drillers lowered the tally seven times. The current total, far from the peak of 1,609 attained in October 2014, is also lower than 860 a year ago.

Natural Gas Rig Count Falls in US: The natural gas rig count of 162 is below the count of 165 for the week ended Aug 16. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 182. Per the latest report, the number of natural gas-directed rigs is 89.9%, below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 50 units, lower than the prior-week count of 52. 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 866 was below the prior-week level of 883.

Gulf of Mexico (GoM) Rig Count Increases: The GoM rig count is 26 units, of which 24 were oil-directed. The count was higher than the prior-week tally of 25.

Rig Count in Major Basins & Outlook

While Permian — the most prolific basin — removed seven oil rigs in the week ended Aug 23, the rig count in DJ-Niobrara was lowered by five.  

Investors should know that domestic drillers may continue to lower rigs in the oil patches since the crude pricing scenario is weak and U.S. drillers have a conservative capital spending plan for this year.  Despite the bearish landscape, it would be wise for investors to keep an eye on Permian drillers which are ramping up crude production with the deployment of lesser rigs. Two Permian drillers that should be in investors’ watch list are Devon Energy Corporation DVN and Pioneer Natural Resources Company PXD. 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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Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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