In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company BHGE, reported a decline in total rig count in the United States.

Details on 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 Baker Hughes’ rotary rig count hampers demand for energy services like drilling, completion and production provided by the likes of Halliburton Company HAL, Schlumberger Ltd. SLB, Weatherford International plc WFT, Diamond Offshore Drilling, Inc. DO and Transocean Ltd. RIG.

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 936 in the week ended Jan 19 — lower than the prior week’s 939. This marked a decrease in rig count for three times in the last four 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 694.

For the week in discussion, the fall in rig count can be attributed to decreased onshore operations. The number of onshore rigs were 916, lower than 919. The tally for offshore and inland waters were 19 and 1, in line with the respective counts for the week ended Jan 12. 

Oil Rig Count: Oil rig count of 747 slipped from 752 recorded for the week ended Jan 12. This marked a decline after the domestic plays witnessed the addition of 10 rigs through the week ended on Jan 12.

However, 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 551.

Natural Gas Rig Count: The natural gas rig count of 189 was up from 187 for the week ended Jan 12. Like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 142.   

Per the most 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 fell from the count of 62 for the week ended Jan 12. 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 two units to 879.

Gulf of Mexico (GoM): The GoM rig count is at 19 units — 16 of which were oil-directed — in line with the tally for the week ended Jan 12.

Conclusion

The number of rigs exploring oil decreased while the count for natural gas increased. Overall, the total tally of rigs in the United States declined, thanks to the removal of the respective four and three rigs from the Utica and Eagle Ford shale plays. In the Utica resources, natural gas rig count fell from 27 to 24, while the tally for oil rig was zero against 1 in the week ended Jan 12. At the Eagle Ford shale, the count of rigs exploring crude fell from 62 to 58.

On top of that, two rigs were removed from each of DJ-Niobrara basin, Cana Woodford shale and Barnett shale play.

Although the count of oil rigs fell, there has been plenty of room for crude explorers to ramp up drilling, given that the commodity has been trading above the $60-per-barrel mark.  

Energy stocks that should make valuable additions to your portfolio are Cabot Oil & Gas Corporation COG and EOG Resources, Inc. EOG. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.   

Headquartered in Houston, TX, Cabot is primarily engaged in exploration and development activities. We expect the company to see year-over-year earnings growth of more than 357% in 2017.

Headquartered in Houston, TX, EOG Resources is also an upstream energy player. The company is likely to witness year-over-year earnings growth of 157.1% in 2017.

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