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US Drillers Deploy More Oil Rigs as Crude Gains

In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company BHGE, reported an increase in oil rig count in the United States. However, the number of rigs searching for natural gas has declined.

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 940 in the week ended Sep 29 – higher than the prior week’s 935. This marked an increase in total rig count after the tally declined six times in the last nine 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 522.

For the week in discussion, the increase in rig count can be attributed to increased onshore and offshore operations. The count of rigs engaged in offshore works rose from 19 to 22, while the tally for onshore activities jumped to 916 from 913.

However, the number of rigs for inland waters fell by one unit to two.

Oil Rig Count: Oil rig count rose by six to 750. It is to be noted that the rigs exploring crude increased after falling for three weeks in a row. Also, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 425.    

Natural Gas Rig Count: The natural gas rig count – which plunged to its lowest last August – declined by one unit to 189. Like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 96. As per the most recent report, the number of natural gas-directed rigs is nearly 88.2%, 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 four units to 64, 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) increased by nine units to 876.

Gulf of Mexico (GoM): The GoM rig count stands at 22 units – 18 of which were oil-directed – higher than the prior count of 19.

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 natural gas in the United States has decreased, however, the count for oil has increased. Overall total oil and gas rig count has jumped, primarily supported by the addition of four rigs in Utah. Louisiana witnessed two more rigs for upstream operations.  

Weak oil prices led the explorers to lower the number of drilling rigs in the domestic crude resources. But after oil crossed the $50-per-barrel mark, the upstream business seemed lucrative and drillers started gathering in crude patches.

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 Lonestar Resources US LONE and W&T Offshore, Inc. WTI. Lonestar sports a Zacks Rank #1 (Strong Buy), while W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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.

Headquartered in Houston, TX, W&T Offshore primarily involves in exploration and development of oil resources in the gulf coast area. We expect year-over-year earnings growth of 146.3% for W&T Offshore 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
 
W&T Offshore, Inc. (WTI): Free Stock Analysis Report
 
Lonestar Resources US Inc. (LONE): Free Stock Analysis Report
 
Baker Hughes Incorporated (BHGE): Free Stock Analysis Report
 
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