In its weekly release, Houston-based oilfield services company
Baker Hughes Inc.
) reported a dip in the U.S. rig count (number of rigs searching
for oil and gas in the country).
This can be attributed to cutbacks in the tally of gas-directed
rigs, partially offset by increase in oil rig count. In
particular, the natural gas rig count dropped to a new 19-year
low, while oil drilling jumped to another 27-year high.
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
Rigs engaged in exploration and production in the U.S. totaled
1,803 for the week ended Mar 21, 2014. This was down by 6 from
the previous week's rig count and indicates the first decrease in
Despite this, 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 1,746.
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 descended by 7 to 1,730, offshore
drilling was up by 1 to 55 rigs, while inland waters activity
remained steady at 18 units.
Natural Gas Rig Count:
Natural gas rig count decreased for the second successive week to
326 (a drop of 18 rigs from the previous week). As per the most
recent report, the number of natural gas-directed rigs is at
their lowest level since May 5, 1995 and is down 60% from its
recent peak of 811, achieved in 2012. In fact, the current
natural gas rig count remains 80% below its all-time high of
1,606 reached in late summer 2008. In the year-ago period, there
were 418 active natural gas rigs.
Oil Rig Count:
The oil rig count was up by 12 to 1,473. The current tally - the
highest since Baker Hughes started breaking up oil and natural
gas rig counts in 1987 - is way above the previous year's rig
count of 1,324. It has recovered strongly from a low of 179 in
June 2009, rising 8.2 times.
Miscellaneous Rig Count:
The miscellaneous rig count (primarily drilling for geothermal
energy) at 4 remained unchanged from the previous week.
Rig Count by Type:
The number of vertical drilling rigs fell by 9 to 384, 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
3 to 1,419. In particular, horizontal rig units came off by 6
from last week's all-time high of 1,212.
Gulf of Mexico (GoM):
The GoM rig count was up by 1 to 53. Oil drilling improved by 2
units to 39 rigs, while gas rigs decreased from their week-ago
level by 1 to 14.
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
). However, our preferred pick in this group is
Willbros Group Inc.
). The Houston, Texas-based firm - sporting a Zacks Rank #1
(Strong Buy) - has a solid secular growth story with potential to
rise significantly from the current level.
BAKER-HUGHES (BHI): Free Stock Analysis
HALLIBURTON CO (HAL): Free Stock Analysis
SCHLUMBERGER LT (SLB): Free Stock Analysis
WILLBROS GROUP (WG): Free Stock Analysis
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