In its weekly release, Baker Hughes Company BKR reported a drop in the U.S. 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 and Transocean Ltd. RIG.
Total US Rig Count Falls: Rigs engaged in the exploration and production of oil and natural gas in the United States fell to an all-time low of 258 in the week through Jul 10, compared with the prior-week count of 263. The current national rig count is below the prior year’s 958.
Investors should know that with the recent all-time low mark, the tally has touched record-low levels for 10 successive weeks, thanks to dented global energy demand owing to the coronavirus pandemic.
The number of onshore rigs in the week ending Jul 10 totaled 246 versus the previous week’s 251. However, the tally of rigs operating offshore plays through the week till Jul 10 was 12, in line with the prior week count. Notably, no rigs operated in inland waters, same as in the prior week.
US Removes 4 Oil Rig: Oil rig count was 181 in the week through Jul 10, compared with 185 in the week ended Jul 2. Notably, the tally has never dropped to such a low since June 2009. Also, the tally declined for 17 consecutive weeks. Investors should note that the current tally of oil rigs, far from the peak of 1,609 attained in October 2014, is also below the year-ago 784.
Natural Gas Rig Count Decreases in US: The natural gas rig count of 75 showed a drop from the prior-week count of 76. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 172. Notably, per the latest report, the number of natural gas-directed rigs is 95.3% below the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 19 units compared with the prior-week count of 17. However, 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 239 compared with the prior-week level of 246.
Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count is 12 units, of which all were oil-directed. The count was flat with the prior-week count.
Rig Count in Major Basins
Permian — the most prolific basin in the United States — saw a drop in oil rig tally by one in the week ended Jul 10. Importantly, the oil rig count dropped for 17 consecutive weeks in Permian. Moreover, the drillers in the Eagle Ford shale play removed two oil rigs in the week ended Jul 10.
With oil prices recovering rapidly – the West Texas Intermediate (WTI) crude has improved more than 213% since late April – most analysts opine that the decline in weekly rig count will narrow down further. In fact, some analysts believe that if the recovery sustains, since more people are getting back to work on easing lockdown measures, many explorers will consider adding rigs.
Meanwhile, investors may consider two energy stocks which are expected to benefit if the oil price rally sustains – Devon Energy Corporation DVN and Diamondback Energy Inc. FANG. While Devon Energy carries a Zacks Rank #2 (Buy), Diamondback carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Transocean Ltd. (RIG) : Free Stock Analysis Report
Schlumberger Limited (SLB) : Free Stock Analysis Report
Halliburton Company (HAL) : Free Stock Analysis Report
Devon Energy Corporation (DVN) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
Baker Hughes Company (BKR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research