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MARKETS LIVE BLOG:

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Permian Basin Witnesses the Loss of 6 Oil Drilling Rigs

Zacks Equity Research

In its weekly release, Baker Hughes, a GE company BHGE reported a decline in 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 services 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 Decreases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 975 in the week ended Jun 7, down from the prior-week tally of 984. With this, the tally declined in eight of the past nine weeks. The current national rig count is also lower than the prior year’s 1062.

The number of onshore rigs, through the week ended Jun 7, totaled 948, lower than the previous week’s count of 957. Moreover, four rigs operated in inland waters and 23 rigs worked in the offshore plays. The count of both inland and offshore rigs was in line with the prior-week tally.

US Removes 11 Oil Rigs: Oil rig tally was 789, down from 800 in the week ended May 31. With this, the tally for crude drilling rig fell to the lowest level since February 2018. Notably, drillers cut the largest number of rigs through the week since April.

Moreover, the current total, far from the peak of 1,609 attained in October 2014, is lower than 862 a year ago.

Natural Gas Rig Count Increases in US: The natural gas rig count of 186 is higher than the count of 184 for the week ended May 31.

However, the count of rigs exploring the commodity is lower than the prior-year weeks’ tally of 198. Per the latest report, the number of natural gas-directed rigs is 88.4% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 46 units against the previous week’s 52. Notably, 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 929 was below the prior-week level of 932.

Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count is 23 units, of which 20 were oil-directed. The count was in line with the prior-week tally.

Conclusion

Six oil drilling rigs were removed from the Permian Basin. This primarily led to a drop in total rig count operating in the United States. Notably, Permian — the most prolific basin in the United States which employs roughly half of the nation’s total rigs — has seen a decline in oil rigs in seven of the last eight weeks. This reflects conservative capital spending by domestic explorers and producers following the downward movement in oil price.

Despite the bearish landscape, 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 of crude volumes. Two Permian drillers that investors may consider are Devon Energy Corporation DVN and Pioneer Natural Resources Company PXD. While Devon carries a Zacks Rank #3 (Hold), Pioneer Natural has a Zacks Rank #2 (Buy). 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
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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Zacks Investment Research