In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company BHGE, reported a decline in total rig count 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 hampers 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.
Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 924 in the week ended Jan 5 — lower than the prior week’s 929. With this, the count fell for two weeks in a row.
Since it slipped to an all-time low of 404 in May 2016, 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 665.
For the week in discussion, the fall in rig count can be attributed to decreased onshore, offshore and inland operations. The number of onshore rigs were 906, lower than 909. The tally for offshore was 17, down from 18. One rig operated in the inland waters last week against the count of two for the week ended Dec 29.
Oil Rig Count: Oil rig count of 742 fell from 747 recorded for the week ended Dec 29. However, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 529.
Natural Gas Rig Count: The natural gas rig count of 182 was in line with the week ended Dec 29. Like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 135.
Per the most recent report, the number of natural gas-directed rigs is almost 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 62 units decreased from 65. Moreover, 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) declined by two units to 862.
Gulf of Mexico (GoM): The GoM rig count is at 17 units — 14 of which were oil-directed — down from 18 for the week ended Dec 29.
The number of rigs exploring natural gas in the United States remained in line, while the count of rigs looking for oil decreased. Naturally, the total oil and gas rig count fell, primarily due to the removal of five onshore and one offshore rig in Louisiana. Two rigs were also removed from Oklahoma.
The crude pricing scenario has been healthy after the OPEC members agreed to extend the production curb deal beyond first-quarter 2018. The fall in U.S drilling rigs also supported the crude rally.
Given that oil crossed the $60-per-barrel mark, we believe that the business scenario has been favorable for exploration and production players.
Two energy stocks that should make valuable additions to your portfolio are Cabot Oil & Gas Corporation COG and Approach Resources Inc. AREX. Cabot 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.
Headquartered in Houston, TX, Cabot is primarily engaged in exploration and development activities. We expect the company to see year-over-year earnings growth of more than 357% 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 nearly 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
Cabot Oil & Gas Corporation (COG) : Free Stock Analysis Report
Approach Resources Inc. (AREX) : Free Stock Analysis Report
Baker Hughes Incorporated (BHGE) : Free Stock Analysis Report
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