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US Drillers Remove Oil & Gas Rigs from Shale Plays

Zacks Equity Research
The number of rigs exploring oil and natural gas in the United States continues to decline.

In its weekly release, Houston-based oilfield services player Baker Hughes reported a decrease in oil and gas rig counts in the United States.    

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 928 in the week ended Oct 13 – lower than the prior week’s 936. This marked a decline in rig count for seven times in the last 10 weeks.   

Since it slipped to an all-time low of 404 last May, 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 539.

For the week in discussion, the fall in rig count can be attributed to lower onshore and offshore operations. The count of rigs engaged in offshore works slipped from 22 to 20, while the tally for onshore activities fell to 907 from 913.

However, the tally for inland waters remained the same at one.

Oil Rig Count: Oil rig count fell by five to 743. It is to be noted that the rigs exploring crude decreased for five times in the last six weeks. But, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 432.  

Natural Gas Rig Count: The natural gas rig count – which plunged to its lowest last August – declined by two units to 185. However, like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 105. As per the most recent report, the number of natural gas-directed rigs is nearly 88.5%, below the all-time high of 1,606 achieved in late summer 2008.  

Rig Count by Type: The number of vertical drilling rigs decreased by two units to 63, while the horizontal rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) fell by six units to 786.

Gulf of Mexico (GoM): The GoM rig count stands at 20 units – 17 of which were oil-directed – lower than the prior count of 22.

Details of the Weekly Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, acts as a yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.

Change in Baker Hughes’ rotary rig count weighs heavily on demand for energy services, drilling, completion, production, etc., provided by companies like Halliburton Company HAL, Schlumberger Ltd. SLB, Weatherford International plc WFT, Diamond Offshore Drilling, Inc. DO and Transocean Ltd. RIG.

Conclusion

The number of rigs exploring oil and natural gas in the United States has decreased, thanks to the removal of six rigs from the Eagle Ford shale play. Moreover, the Barnett shale saw the removal of four rigs.

Declining rig count, helping reducing crude glut, helped oil price to settle above the $50-per-barrel mark again.  

Development in this front is likely to prove beneficial for oil and gas exploration and production companies. Two oil stocks that might make valuable additions to your portfolio now are Abraxas Petroleum (AXAS) and Cimarex Energy (XEC). Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in San Antonio, TX, Abraxas Petroleum explores oil and gas resources in the United States. The company is expected to witness 317.9% year-over-year earnings growth in 2017.  

Cimarex Energy – headquartered in Denver, CO – is primarily involved in exploration and development of oil resources in Oklahoma. We expect year-over-year earnings growth of 498.8% for Cimarex Energy 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
 
Baker Hughes Incorporated (BHGE) : Free Stock Analysis Report
 
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