In its weekly release, Houston-based oilfield services company
Baker Hughes Inc.
) reported a rise in the U.S. rig count (number of rigs searching
for oil and gas in the country). This can be attributed to an
increase in the tally of mainly oil-directed rigs.
The Baker Hughes data, issued since 1944, acts as an important
yardstick for energy service providers in gauging the overall
business environment of the oil and gas industry.
Analysis of the Data
Weekly Summary: Rigs engaged in exploration and production in the
U.S. totaled 1,908 for the week ended Aug 8, 2014. This was up by
19 from the previous week's rig count.
The current nationwide rig count is more than double the lowest
level reached in recent years (876 in the week ended Jun 12, 2009)
and is above the prior-year level of 1,770. It rose to a 22-year
high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep
Rigs engaged in land operations rose by 18 to 1,832, offshore
drilling was up by 4 to 62 rigs, while inland waters activity fell
by 3 to 14 units.
Natural Gas Rig Count: The natural gas rig count - which slumped to
its lowest point last month since May 1993 - was up by 3 to 316. As
per the most recent report, the number of natural gas-directed rigs
is down approximately 61% from its recent peak of 811, achieved in
In fact, the current natural gas rig count is 81% below its
all-time high of 1,606 reached in late summer 2008. In the year-ago
period, there were 386 active natural gas rigs.
Oil Rig Count: The oil rig count was up by 15 to 1,588. The current
tally is way above the previous year's rig count of 1,385. It has
recovered strongly from the low of 179 in Jun 2009, rising 8.9
Miscellaneous Rig Count: The miscellaneous rig count (primarily
drilling for geothermal energy) rose by 1 to 4 from the previous
Rig Count by Type: The number of vertical drilling rigs rose by 5
to 378, while 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) was
up by 14 to 1,530.
Gulf of Mexico (GoM): The GoM rig count here was up by 2 to 60.
A Key Barometer of Drilling Activity: An increase or decrease in
the Baker Hughes rotary rig count heavily weighs on the demand for
energy services - drilling, completion, production, etc. - provided
by companies that include large-cap names like Halliburton Co. (
) and Schlumberger Ltd. (
However, our preferred pick in this group is Flotek Industries Inc.
). The Houston, TX-based company - carrying a Zacks Rank #2 (Buy) -
has a solid secular growth story with the potential to rise
significantly from the current level.
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