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 upside can be mainly
attributed to an increase in the tally of oil-directed rigs,
partially offset by lower natural gas rig count that fell to a
new 18- year low.
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The Baker Hughes' data, issued since 1944, acts as an important
yardstick for drilling contractors like
Diamond Offshore Drilling Inc.
) , etc. in gauging the overall business environment of the oil
and gas industry.
Analysis of the Data
Rigs engaged in exploration and production in the U.S. totaled
1,769 for the week ended May 10, 2013. This was up by 5 from the
previous week's rig count and indicates the second increase in as
The current nationwide rig count is more than double the lowest
level reached in recent years (876 in the week ended Jun 12,
2009), though it is way below the prior-year level of 1,974. 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 ascended by 6 to 1,696, offshore
drilling was down by 1 to 50 rigs, while inland waters activity
remained steady at 23 units.
Natural Gas Rig Count:
Natural gas rig count decreased for the third successive week to
350 (a drop of 4 rigs from the previous week). As per the most
recent report, the number of natural gas-directed rigs is at
their lowest level since Jun 16, 1995 and is down 57% from its
2012 peak of 811.
The current natural gas rig count remains 78% below its all-time
high of 1,606 reached in late summer 2008. In the year-ago
period, there were 598 active natural gas rigs.
Oil Rig Count:
The oil rig count - that rocketed to a 25-year high of 1,432 in
Aug last year - jumped by 9 to 1,412. The current tally is well
above the previous year's rig count of 1,372. It has recovered
strongly from a low of 179 in Jun 2009, rising 7.9 times.
Miscellaneous Rig Count:
The miscellaneous rig count (primarily drilling for geothermal
energy) at 7 remained unchanged from the previous week.
Rig Count by Type:
The number of vertical drilling rigs fell by 3 to 472, 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
8 to 1,297. In particular, horizontal rig units - that reached an
all-time high of 1,193 in May 2012 - rose by 7 from the last
week's level to 1,099.
As of now, Transocean, Diamond Offshore and Ensco are all Zacks
Rank #3 (Hold) stocks, implying that these are expected to
perform in line with the broader U.S. equity market over the next
one to three months.