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U.S. Rig Count Rises for Seven Consecutive Weeks

Zacks Equity Research

Oil field services firm Baker Hughes Inc. BHI recently declared the rig count for the week ended Mar 3, 2017. In the U.S., the total number of rigs increased from the previous week owing to an increase number of land and offshore rigs. This represents the seventh consecutive increase in the U.S. weekly rig count after the U.S. witnessed a fall in rig numbers during the week ended Jan 13.  

North America Rig Count

Total rig count in North America – the U.S. and Canada – for the week of Mar 3, 2017, was 1091. The reported figure was lower than 1095 a week ago but significantly higher than the year-earlier figure of 618.   

Total U.S. rig: Total number of rigs in the U.S. was 756. This was higher than 754 rigs for the week ended Feb 24, and 489 during the year-ago period.    

Of the total U.S. rigs, land rigs were 734. This is higher than the 733 rigs in the previous week and 463 rigs in year-ago period.      

The number of U.S. offshore rigs for the week ended Mar 3, 2017, was 18. This was higher than 17 rigs in the previous week but lower than 24 rigs in the previous year.

U.S Oil Rig Count: The count was up by seven from the previous week to 609. The number had skyrocketed to 1,609 in Oct 2014 – the highest figure to have been reported since Baker Hughes started breaking up oil and natural gas rig counts in 1987. The current tally is also well above the previous year’s rig count of 392.   

U.S Natural Gas Rig Count: The count fell by five from the last week to 146. Moreover, the current natural gas rig count is almost 91% below the high of 1,606 reached in late summer 2008. We note that the company had recorded 97 active natural gas rigs in the year-ago period.   

Canada rig: In Canada, the total rig count was 335 compared with 341 rigs in last week but higher than 129 a year ago.  

What Drove the Improvement?

In North America, only the U.S. rig count increased both from the prior week and the previous year. Texas, where rig count rose by six, was the prime contributor to growth in the U.S. weekly rig count. Moreover, North Dakota added three rigs to the U.S. count.

Let’s analyze the broader factor for the increase in rig count in the U.S. Since OPEC and non-OPEC countries agreed to curb crude output amid the supply glut, oil prices started to improve again. In fact, many media releases show that the production cut has started to bear fruit.

Given these developments, U.S. shale producers have been gathering to oil patches as they will be able to sell the commodity at higher prices. In other words, U.S. exploration and production (E&P) companies are expected to produce more and hence, could gain market share at the expense of OPEC amid increasing oil prices.

Companies Poised to Benefit  

U.S. E&P firms will likely benefit the most from these developments. Our proprietary model shows that Pioneer Natural Resources Co. PXD, Ultra Petroleum Corp. UPLMQ, Comstock Resources Inc. CRK and W&T Offshore Inc. WTI are among the upstream companies that are worth including in your portfolio. Pioneer and Ultra Petroleum sport a Zacks Rank #1 (Strong Buy) while Comstock and W&T Offshore carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

All the stocks show strong pricing figure and were able to surpass the Zacks categorized Oil & Gas-U.S Exploration & Production industry over the last six months – since Oct 3, 2016. While the broader industry lost 7.4% during the aforesaid period, shares of Pioneer, Ultra Petroleum, Comstock and W&T Offshore gained 4.2%, 39.6%, 19.5% and 65.7%, respectively.

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Baker Hughes Incorporated (BHI): Free Stock Analysis Report
Pioneer Natural Resources Company (PXD): Free Stock Analysis Report
Comstock Resources, Inc. (CRK): Free Stock Analysis Report
W&T Offshore, Inc. (WTI): Free Stock Analysis Report
Ultra Petroleum Corp. (UPLMQ): Free Stock Analysis Report
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