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Oil Drillers Remove Rigs From Permian Basin & Cana Woodford

Zacks Equity Research

In its weekly release, Baker Hughes Company BKR reported a drop in 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, Diamond Offshore Drilling, Inc DO and Transocean Ltd. RIG.

Details

Total US Rig Count Declines: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 799 in the week through Dec 6, lower than the prior-week count of 802. The current national rig count is also below the prior year’s 1075.

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The number of onshore rigs, in the week ending Dec 6, totaled 777 versus the previous week’s 780. However, the tally of rigs operating offshore plays through the week till Dec 6 was 22, flat with the count through the week ended Nov 27. Notably, there was no rig activity in inland waters, as was the case a week ago.

US Removes 5 Oil Rigs: Oil rig count was 663 versus 668 in the week ended Nov 27. Notably, the tally has never dropped to such a level since April 2017. In the past seven weeks, drillers lowered the tally successively. The current total, far from the peak of 1,609 attained in October 2014, is also below the year-ago 877.

Natural Gas Rig Count Increases in US: The natural gas rig count of 133 is higher than the prior-week count of 131. However, 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 52 units, higher than the prior-week count of 48. 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 747 was below the prior-week level of 754.

Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count is 22 units, of which 21 were oil-directed. The count was in line with the prior-week tally.

Rig Count in Major Basins

Drillers have removed oil rigs from major basins like Permian and Cana Woodford. In Permian, the count of oil rigs was lowered by five, while two rigs were removed from Cana Woodford.

In the Permian — the most prolific basin in the United States — oil drillers have removed rigs for seven weeks in a row.

Outlook

Investors should know that domestic drillers may continue to lower rigs in the oil patches as they have a conservative capital budget for 2019.

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 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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Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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
 
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Zacks Investment Research