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Permian, Cana Woodford & Eagle Ford Drillers Lower Oil Rigs

Zacks Equity Research

Baker Hughes, a GE company BHGE reported a decline in the U.S. weekly rig count.

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 868 in the week through Sep 20, lower than the prior-week count of 886. The current national rig count is also below the prior year’s 1053.   

The number of onshore rigs, in the week ending Sep 20, totaled 842 versus the previous week’s 860. Moreover, the tally of rigs operating offshore plays through the week till Sep 20 was 25, lower than the count of 26 through the week ended Sep 13. However, the count of rig in inland waters was one as compared to no rigs a week ago.

US Removes 14 Oil Rigs: Oil rig count was 719, down from 733 in the week ended Sep 13. Notably, the tally has never dropped to such a level since May 2017. Importantly, in the past five weeks, drillers lowered the tally successively. The current total, far from the peak of 1,609 attained in October 2014, is also lower than 866 a year ago.       

Natural Gas Rig Count Declines in US: The natural gas rig count of 148 is lower than the prior-week count of 153. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 186. Per the latest report, the number of natural gas-directed rigs is 91%, below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 51 units, lower than the prior-week count of 53. 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 817 was below the prior-week level of 833.

Gulf of Mexico (GoM) Rig Count Declines: The GoM rig count is 23 units, of which 22 were oil-directed. The count was lower than the prior-week tally of 25.

Rig Count in Major Basins & Outlook

Each of Permian — the most prolific basin — Cana Woodford and Eagle Ford lowered oil rig tally by two in the week ended Sep 20. Importantly, the count of oil rigs in Permian fell for six consecutive weeks.  

Investors should know that domestic drillers may continue to lower rigs in the oil patches as they have a conservative capital budget for 2019 and the crude pricing scenario is weak. 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
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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