US Oil & Gas Rig Tally Hits Record Lows for 5 Straight Weeks

In its weekly release, Baker Hughes Company BKR reported a drop in the 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 Falls: Rigs engaged in the exploration and production of oil and natural gas in the United States fell to an all-time low of 284 in the week through Jun 5, compared with the prior-week count of 301. The current national rig count is below the prior year’s 975.

Investors should know that with the recent all-time low mark, the tally has touched record-low levels for five successive weeks, thanks to dented global energy demand owing to the coronavirus pandemic.

The number of onshore rigs in the week ending Jun 5 totaled 271 versus the previous week’s 289. However, the tally of rigs operating offshore plays through the week till Jun 5 was 13 versus the prior-week count of 12. Notably, no rigs operated in inland waters, same as it was in the prior week.

US Removes 16 Oil Rigs: Oil rig count was 206 in the week through Jun 5, compared with 222 in the week ended May 29. Notably, the tally declined for 12 consecutive weeks. Investors should also note that the current tally of oil rigs, far from the peak of 1,609 attained in October 2014, is also below the year-ago 789.

Natural Gas Rig Count Declines in US: The natural gas rig count of 76 is lower than the prior-week count of 77. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 186. Per the latest report, the number of natural gas-directed rigs is 95.3% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled seven units, in line with the prior-week count. 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 277 was lower than the prior-week level of 294.

Gulf of Mexico (GoM) Rig Count Increases: The GoM rig count is 13 units, of which all were oil-directed. The count was higher than the prior-week tally of 12.

Rig Count in Major Basins  

Permian — the most prolific basin in the United States — saw a drop in oil rig tally by seven in the week ended Jun 5. Importantly, the oil rig count dropped for 12 consecutive weeks in Permian. Moreover, drillers in the Eagle Ford shale play lowered oil rig count by nine.

Outlook

Explorers and producers may again start adding rigs in the shale plays since the energy sector is stealing the show again, with oil gradually entering the bullish territory. The price of West Texas Intermediate (WTI) recently touched the $40-per-barrel mark and has surged more than 50% in the past month. With more people returning to work, raising fuel demand, the commodity price is likely to improve further.

It seems to be an opportune moment for energy investors to consider two oil stocks. QEP Resources, Inc. QEP rose more than 40% on Jun 8 and carries a Zacks Rank #2 (Buy). Marathon Oil Corporation MRO surged 15.2% and carries 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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Marathon Oil Corporation (MRO) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
QEP Resources, Inc. (QEP) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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