Baker Hughes Counts 19 More U.S. Rigs, Oil Rigs Rise by 15 - Analyst Blog

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In its weekly release, Houston-based oilfield services company Baker Hughes Inc. ( BHI ) 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 12.

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 2012.

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 times.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) rose by 1 to 4 from the previous week.

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.

Conclusion

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. ( HAL ) and Schlumberger Ltd. ( SLB ).

However, our preferred pick in this group is Flotek Industries Inc. ( FTK ). 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BHI , SLB , HAL , FTK

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