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Drillers in US Plays Add Oil Rigs Despite Conservative Budget

Nilanjan Banerjee

In its latest weekly release, Baker Hughes Company BKR reported that the number of drilling rigs in the United States was flat with the count for the week through Dec 6.

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.

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Details

Total US Rig Count Flat: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 799 in the week through Dec 13, in line with the prior-week count. The current national rig count is, however, below the prior year’s 1071.

The number of onshore rigs, in the week ending Dec 13, totaled 776 versus the previous week’s 777. However, the tally of rigs operating offshore plays through the week till Dec 13 was 23 versus the prior-week count of 22. Notably, there was no rig activity in inland waters, as was the case a week ago.

US Adds 4 Oil Rigs: Despite conservative spending plans by U.S. drillers, oil rig count was 667 versus 663 in the week ended Dec 6. Thus, in the past eight weeks, oil drillers added rigs in the domestic play for the first time. The current total, far from the peak of 1,609 attained in October 2014, is however, below the year-ago 873.

Natural Gas Rig Count Decreases in US: The natural gas rig count of 129 is lower than the prior-week count of 133. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 198. Per the latest report, the number of natural gas-directed rigs is 92% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 54 units, higher than the prior-week count of 52. 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 745 was below the prior-week level of 747.

Gulf of Mexico (GoM) Rig Count Rises: The GoM rig count is 23 units, of which 22 were oil-directed. The count was higher than the prior-week tally of 22.

Rig Count in Major Basins

Drillers have added two oil rigs in Utica. Notably, no oil rig operated in the shale play since the week ended Sep 21, 2018.

In Permian, the count of oil rigs through the week ended Dec 13 was 399, in line with the prior-week count. In the basin, drillers lowered rigs in seven of eight weeks.

Outlook

Investors should know that domestic drillers may again start removing rigs from oil patches as they have a conservative capital budget.

Despite the bearish landscape, it would be wise for investors to keep an eye on Permian drillers, which are producing more crude with lesser rigs. Two Permian drillers that investors should keep an eye on are Diamondback Energy, Inc. FANG 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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Baker Hughes Company (BKR) : Free Stock Analysis Report
 
Schlumberger Limited (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
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
 
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