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US Oil Rig Tally Falls After 2 Straight Weeks of Increase

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 963 in the week through Jul 3, lower than the prior-week count of 967. The current national rig count is also lower than the prior year’s 1052.

The number of onshore rigs, in the week ending on Jul 3, totaled 936, lower than the previous week’s 938. Moreover, the tally of rigs operating offshore plays through the week till Jul 3 was 24, lower than the prior week’s 26. However, three rigs operated in inland waters, in line with the prior-week tally.

US Removes 5 Oil Rigs: Oil rig count was 788, down from 793 in the week ended Jun 28. This marks a decline after the tally increased for two consecutive weeks. Moreover, the current total, far from the peak of 1,609 attained in October 2014, is lower than 863 a year ago.

Natural Gas Rig Count Increases in US: The natural gas rig count of 174 is higher than the count of 173 for the week ended Jun 28.

However, the count of rigs exploring the commodity is lower than the prior-year week’s 187. Per the latest report, the number of natural gas-directed rigs is 89.2%, below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 58 units against the previous week’s 59. 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 905 was below the prior-week level of 908.

Gulf of Mexico (GoM) Rig Count Falls: The GoM rig count is 24 units, of which 22 were oil-directed. The count was lower than the prior-week tally of 26.

Last Word

The decline in count for oil drilling rigs in the United States reflects conservative capital spending by domestic explorers and producers. Notably, although Permian — the most prolific basin in the United States which employs roughly half of the nation’s total rigs — saw an increase in oil rigs for two straight weeks, it witnessed a fall in the count in seven of the past 10 weeks.

Overall, it would be wise for investors to consider Permian drillers as they have become more efficient with the deployment of lesser rigs to produce more crude volumes. Two Permian drillers that investors may consider 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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Halliburton Company (HAL) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : 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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