U.S. Rig Count Declines for the Fourth Consecutive Month

Baker Hughes Company BKR recently announced the rig count for June. In the United States, the total rig number fell from the May 2020 figure due to a drop in count of both onshore and offshore rigs. This was the fourth consecutive decline in the U.S. monthly rig count.

Precisely, with the coronavirus pandemic denting global energy demand, explorers and producers are getting little incentive to invest in drilling activities and are thereby curtailing capital budget. Thus, lower spending by upstream energy players has forced drillers to remove rigs from oil and gas patches.

More on 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 players’ rotary rig count affects demand for energy services like drilling, completion and production provided by companies like Halliburton Company HAL, Schlumberger Limited SLB and Transocean Ltd. RIG.

Analysis of the Data

North America Rig Count

In June 2020, rig count in North America (the United States and Canada) totaled 292. The figure was lower than 371 in May 2020 and 1,083 a year ago.

U.S. rig: Total number of rigs in the United States was 274. The figure is lower than 348 rigs last May and 969 a year ago.

Of the total count, land rigs were 262. This is lower than 335 rigs in the prior month and 945 rigs a year ago.

The number of U.S. offshore rigs in June 2020 was 12 compared with 13 in May 2020 and 24 in June 2019.

Canada rig: In Canada, the total rig count of 18 was lower than 23 in May 2020 and 114 in June 2019.

International Rig Count

Total international rig count (offshore and land) in the month of June was 781. The tally fell by 24 from May 2020. Moreover, the figure was lower than 1,138 recorded in June 2019.

Offshore rig: The offshore rig count in June 2020 was 194 compared with 195 in May 2020 and 246 in the prior-year period.

Land Rig: The land rig count was 587 compared with 610 in May 2020 and 892 in June 2019.

Conclusion

With oil prices recovering gradually – West Texas Intermediate crude has recovered almost 8% in the past month – most analysts opine that the decline in the tally of monthly rig will narrow down further. In fact, some analysts believe that if the recovery sustains, since more people are getting back to work on easing lockdown measures, many explorers will consider adding rigs.

Meanwhile, investors may consider two energy stocks which are expected to benefit if the oil price rally sustains – Devon Energy Corporation DVN and Diamondback Energy Inc. FANG. Both the stocks carry 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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Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
 
Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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