Oklahoma & North Dakota See More Onshore Drilling Rigs

In its weekly release, Baker Hughes (NYSE:BHGE) , a GE company, reported an increase in total rig count in the United States.

About the Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, helps energy service providers gauge the overall business environment of the oil and gas industry.

Change in this Houston-based oilfield services player’s rotary rig count impacts demand for energy services like drilling, completion and production provided by the likes of Halliburton Company (NYSE:HAL) , Schlumberger Ltd. (NYSE:SLB) , Diamond Offshore Drilling, Inc. (NYSE:DO) and Transocean Ltd. (NYSE:RIG) .

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 990 in the week (ended Mar 16) — higher than the prior week’s 984. Notably, the total count increased for the fifth time in the prior seven weeks.

Since it slipped to an all-time low of 404 in May 2016, rig count has been rising rapidly in U.S. shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 789.

For the week in discussion, the rise in rig count can be attributed to higher onshore operations. The number of onshore rigs totaled 973, higher than 967.

Four rigs operated in the inland waters last week, in line with the count for the week ended Mar 9. The tally for offshore rigs was also in line at 13.

Oil Rig Count: Oil rig count of 800 was up from 796 for the week ended Mar 9. Moreover, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly higher than the previous year’s count of 631. The tally for oil rigs increased five times in the last six weeks.

Natural Gas Rig Count: The natural gas rig count of 189 was up from 188 for the week ended Mar 9. With this, the tally increased five times in the last six weeks.

Moreover, like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 157.

Per the recent report, the number of natural gas-directed rigs is 88.2% below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs of 57 units decreased from 61 units. However, the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) increased by 10 units to 933 units.

Gulf of Mexico (GoM): The GoM rig count is at 13 units — 12 of which were oil-directed — in line with the tally for the week ended Mar 9.

Conclusion

The number of total rigs exploring oil and gas in the United States increased, courtesy of the addition of four and three onshore rigs in Oklahoma and North Dakota respectively. Two onshore rigs were also added in Texas.

Crude pricing scenario has been healthy after the OPEC members agreed to extend the production curb deal beyond first-quarter 2018. Given that oil has been trading mostly over the $60-per-barrel mark since January, we believe that there is considerable opportunity for U.S. shale players to continue ramping up drilling activities.

Two energy stocks that should make valuable additions to your portfolio are Continental Resources, Inc. (NYSE:CLR) and Concho Resources Inc. (NYSE:CXO) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Oklahoma City, OK, Continental is primarily an upstream energy player. We expect the company to witness year-over-year earnings growth of 323.5% in 2018.

Headquartered in Midland, TX, Concho explores oil and gas resources in the prospective plays. The company is likely to witness year-over-year earnings growth of 73.2% in 2018.

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