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.
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
1,860 for the week ended Jun 6, 2014. This was down by 6 from the
previous week's rig count and indicates the second decrease in 3
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 1,765. 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 5 to 1,787, offshore
drilling was down by 2 to 58 rigs, while inland waters activity
increased by 1 to 15 units.
Natural Gas Rig Count:
The natural gas rig count - which in April slumped to its lowest
point since May 1993 - decreased for the second time in 3 weeks to
320 (a drop of 6 rigs from the previous week). As per the most
recent report, the number of gas-directed rigs is down by 61% 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 354 active natural gas rigs.
Oil Rig Count:
The oil rig count remained flat at 1,536. 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
1,406. It has recovered strongly from a low of 179 in June 2009,
rising 8.6 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 14 to 389, 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
1,471. In particular, horizontal rig units decreased by 1 from the
last week's all-time high level to 1,250.
Gulf of Mexico (GoM):
The GoM rig count was down by 2 to 56. Oil drilling improved by 2
units to 46 rigs, while gas drilling decreased from their week-ago
level by 4 to 10.
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
C&J Energy Services Inc.
). The Houston, TX-based firm - sporting a Zacks Rank #1 (Strong
Buy) - has a solid secular growth story with potential to rise
significantly from the current level.
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