US Drillers Add Rigs In Oil Plays Despite Conservative Budget

In its weekly release, Baker Hughes Company (NYSE:BKR) reported an increase 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 (NYSE:HAL) , Schlumberger Limited (NYSE:SLB) , Diamond Offshore Drilling, Inc (NYSE:DO) and Transocean Ltd. (NYSE:RIG) .

Details

Total US Rig Count Increases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 793 in the week through Mar 6, higher than the prior-week count of 790. The current national rig count is, however, below the prior year’s 1027.

The number of onshore rigs, in the week ending Mar 6, totaled 768 versus the previous week’s 767. Moreover, the tally of rigs operating offshore plays through the week till Mar 6 was 23, higher than the count of 22 through the week ended Feb 28. In the inland waters, the count was two compared with only one in the prior week.

US Adds 4 Oil Rigs: Oil rig count was 682, up from 678 in the week ended Feb 28. Importantly, in the past five weeks, drillers increased the tally four times despite a conservative capital spending budget. The current total, far from the peak of 1,609 attained in October 2014, is, however, below the year-ago 834.

Natural Gas Rig Count Declines in US: The natural gas rig count of 109 is lower than the prior-week count of 110. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 193. Per the latest report, the number of natural gas-directed rigs is 93.2% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 34 units, lower than the prior-week count of 36. 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 759 was higher than the prior-week level of 754.

Gulf of Mexico (GoM) Rig Count Raises: The GoM rig count is 23 units, of which 21 were oil-directed. The count was higher than the prior-week tally of 22.

Rig Count in Major Basin & Outlook

Permian — the most prolific basin in the United States — increased oil rig tally by four in the week ended Mar 6. Importantly, the count of oil rigs in Permian increased for four consecutive weeks.

Investors should know that domestic drillers may again lower rigs in the oil patches as they have a conservative capital budget. Moreover, a weak crude pricing scenario is not favorable for drilling activities in the shale resources. Notably, Exxon Mobil Corporation (NYSE:XOM) , with significant operations in Permian, recently said that in 2020 it will be reducing 20% of the current operating rigs in the most prolific basin. ExxonMobil currently 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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