US Drillers Lower Rigs In Oil & Gas Shale Resources

In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company (NYSE:BHGE) , reported a fall in oil and natural gas rig count in the United States.

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 936 in the week ended Sep 15 – lower than the prior week’s 944. Notably, total rig count has declined five times in the last seven 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 506.

For the week in discussion, the fall in rig count can be attributed to decreased onshore operations and lower inland water activities.

However, count of rigs engaged in offshore operations rose from 16 to 17.

Oil Rig Count: Oil rig count slipped by seven to 749. It is to be noted that the rigs exploring crude has decreased six times in the last nine weeks.

The current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 416.

Natural Gas Rig Count: The natural gas rig count – which plunged to its lowest last August – fell by one unit to 186. Like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 89. As per the most recent report, the number of natural gas-directed rigs is nearly 89%, below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs slipped by eight units to 67, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was in line with the prior week’s 869.

Gulf of Mexico (GoM): The GoM rig count stands at 17 units – 14 of which were oil-directed – higher than the prior count of 16.

Details of the Weekly Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, acts as an important 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 (NYSE:HAL) , Schlumberger Ltd. (NYSE:SLB) , Weatherford International plc (NYSE:WFT) , Diamond Offshore Drilling, Inc. (NYSE:DO) and Transocean Ltd. (NYSE:RIG) .

Conclusion

The number of rigs searching for crude and natural gas in the United States has declined. Three rigs were removed from Cana Woodford, a liquid rich shale play. Also, Permian basin and Eagle Ford shale play saw the removal of two rigs each.

A persistent fall in drilling rigs in U.S. resources helped crude to reach near the $50-per-barrel mark, significantly higher than the historical low of February 2016.

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 Range Resources Corporation (NYSE:RRC) and Lonestar Resources US (LONE). Both the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Fort Worth, TX, Range Resources is an independent oil and gas company, engaged in the exploration, development and acquisition of U.S. oil and gas resources. We expect year-over-year earnings growth of 1,505.1% for Range Resources in 2017.

Headquartered in Fort Worth, TX, Lonestar explores oil and gas resources in the United States. The company is expected to witness 79.7% year-over-year earnings growth in 2017.

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