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Drillers Remove Oil Rigs in Permian and Cana Woodford Basins

Nilanjan Banerjee

In its weekly release, Baker Hughes Company BKR reported a decline in the number of drilling rigs 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 Decreases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 805 in the week through Dec 27, lower than the prior-week’s count of 813. The current national rig count is also below the prior year’s 1083.  

The number of onshore rigs, in the week ending Dec 27, totaled 781 compared with the previous week’s 788. Moreover, the tally of rigs operating offshore plays through the week till Dec 27 was 23, lower than the prior week count of 24. However, in inland waters, the count was one, in line with the week-ago tally.

US Removes 8 Oil Rigs: Oil rig count was 677 versus 685 in the week ended Dec 20. Notably, the tally has never dropped to such a level since Nov 15. Importantly, in the past 11 weeks, drillers lowered the tally nine times. The current total, far from the peak of 1,609 attained in October 2014, is also below the year-ago 885.  

Natural Gas Rig Count Flat in US: Natural gas rig count of 125 is in line with the prior-week tally. However, the count of rigs exploring the commodity is lower than the prior-year week’s 198. Per the latest report, the number of natural gas-directed rigs is 92.2%, below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 49 units, lower than the prior-week count of 56. 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 756 was lower than the prior-week level of 757.

Gulf of Mexico (GoM) Rig Count Declines: GoM rig count was 23 units, of which 22 were oil-directed. The count was lower than the prior-week tally of 24.

Rig Count in Major Basins

In Permian and Cana Woodford, drillers removed nine and two oil rigs, respectively, in the week through Dec 27. Notably, the removal of rigs in the most prolific basin followed the addition of 15 oil rigs in the week through Dec 20.

Outlook

Investors should know that domestic drillers may continue to remove rigs since explorers have a conservative capital budget in place and have decided to curb spending on drilling new wells.

Despite the bearish landscape, it would be wise for investors to keep an eye on drillers in the Permian, where more crude is being produced with lesser rigs. Two Permian drillers that investors should keep an eye on are Diamondback Energy, Inc. FANG 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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Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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
 
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
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