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Permian Witnesses Oil Rig Count Decline in 10 of 13 Weeks

Zacks Equity Research

In its weekly release, Baker Hughes, a GE company BHGE reported a drop 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 Drops: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 958 in the week through Jul 12, lower than the prior-week count of 963. The current national rig count is also below the prior year’s 1054.

The number of onshore rigs, in the week ending Jul 12, totaled 930 versus previous week’s 936. Moreover, two rigs operated in inland waters, below the prior week’s count of three. However, the tally of rigs operating offshore plays through the week till Jul 12 was 26, higher than the prior week’s 24.

US Removes 4 Oil Rigs: Oil rig count was 784, down from 788 in the week ended Jul 3. This signifies a decline for two consecutive weeks and lowest mark since February 2018. The current total, far from the peak of 1,609 attained in October 2014, is also lower than 863 a year ago.

Natural Gas Rig Count Decreases in US: The natural gas rig count of 172 is lower than the count of 174 for the week ended Jul 3.

Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 189. Per the latest report, the number of natural gas-directed rigs is 89.3%, below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 57 units against the previous week’s 58. 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 901 was below the prior-week level of 905.

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 24.

Permian Basin Count

Six oil drilling rigs were removed from the Permian Basin. Notably, Permian — the most prolific basin in the United States which employs roughly half of the nation’s total rigs — has seen a decline in oil rigs in 10 of the last 13 weeks. This reflects conservative capital spending by domestic explorers as instead of putting more effort to pump black gold, investors are urging upstream energy players to focus on returning capital to shareholders through dividend payments and stock repurchases.

Despite the bearish landscape, it would be wise for investors to keep an eye on Permian drillers which are producing more crude with the deployment of lesser rigs. Two Permian drillers that should be in the watch list of investors 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
 
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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