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Permian Basin Witnesses Removal of 7 Oil Drilling Rigs

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In its weekly release, Baker Hughes, a GE company BHGE reported a drop in 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 services 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 U.S. Rig Count Decreases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1038 in the week ended Mar 1, down from the prior week tally of 1047. This marked a decline in the count for two weeks in a row.

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 higher than the prior-year quarter’s 981.  

The number of onshore rigs totaled 1015, down from 1026 in the previous week. However, the tally for offshore activities totaled 22, up from 19         in the week through Feb 22. One rig operated in the inland waters, down from the tally of two in the prior week.

U.S. Removes 10 Oil Rigs: Oil rig tally was 843, down from 853 in the week ended Feb 22. With this, the tally for oil drilling rigs fell to the lowest mark since May 2018.  

However, the current total, far from the peak of 1,609 attained in October 2014, is higher than 800 a year ago. 

Natural Gas Rig Count Rises in the United States: The natural gas rig count of 195 is higher than the count of 194 for the week ended Feb 22.  

Moreover, like oil, the count of rigs exploring the commodity is above the prior-year quarter’s 181. Per the latest report, the number of natural gas-directed rigs is almost 88%, below the all-time high of 1,606 in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 60 units, down from the previous week’s tally of 63. 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) declined by six units to 978.  

Gulf of Mexico (GoM) Rig Count Increases: The GoM rig count is 22 units, of which 18 were oil-directed. The count was higher than the prior week’s 19.

Conclusion

Seven oil drilling rigs were removed from the prolific Permian Basin, resulting in the weekly rig count decline.

It is to be noted that Schlumberger during its quarterly results announcement revealed that explorers and producers are getting more conservative about investing since there has been a volatility in oil prices. Conservative investments in upstream activities might affect demand for rigs. Hence, drillers may continue to lower oil rig count in the coming weeks. In fact, it is quite obvious that even a more than 20% improvement in West Texas Intermediate (WTI) oil price since the beginning of 2019 has not restored the confidence of upstream energy players in prolific U.S. resources.

Despite the pessimism, there are a couple of upstream energy players like Concho Resources Inc CXO and Apache Corporation APA that investors could keep an eye on. 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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Halliburton Company (HAL) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Apache Corporation (APA) : Free Stock Analysis Report
 
Concho Resources Inc. (CXO) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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