U.S. Rig Count Jumps on Oil, Gas Drilling Improvement - Analyst Blog

By
A A A

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 both oil and 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

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 1,873 for the week ended Jun 27, 2014. This was up by 15 from the previous week's rig count and indicates the second increase in as many weeks.

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 1,748. 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 16 to 1,800, offshore drilling was down by 4 to 55 rigs, while inland waters activity increased by 3 to 18 units.

Natural Gas Rig Count: The natural gas rig count - which earlier this month slumped to its lowest point since May 1993 - increased for the second successive week to 314 (a gain of 3 rigs from the previous week). Despite the weekly growth, 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 353 active natural gas rigs.

Oil Rig Count: The oil rig count was up by 13 to 1,558. 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 1,390. It has recovered strongly from a low of 179 in June 2009, rising 8.7 times.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 1 was down by 1 from the previous week.

Rig Count by Type: The number of vertical drilling rigs rose by 1 to 381, 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 1,492. In particular, horizontal rig units increased by 13 from the last week's level to reach an all-time high of 1,263.

Gulf of Mexico (GoM): The GoM rig count was down by 3 to 54. Oil drilling fell by 4 units to 41 rigs, while gas rigs increased from their week-ago level by 1 to 13.

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 C&J Energy Services Inc. ( CJES ). 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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BAKER-HUGHES (BHI): Free Stock Analysis Report

SCHLUMBERGER LT (SLB): Free Stock Analysis Report

HALLIBURTON CO (HAL): Free Stock Analysis Report

C&J ENERGY SVCS (CJES): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



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 , CJES

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

65,878,391
  • $102.25 ▲ 0.12%
60,267,006
  • $16.01 ▼ 1.17%
45,656,511
  • $13.11 ▼ 4.17%
34,766,553
  • $49.43 ▲ 2.85%
34,661,727
  • $3.60 ▲ 0.28%
29,041,259
  • $19.12 ▼ 0.47%
21,343,464
  • $73.855 ▼ 1.04%
19,552,720
  • $10.85 ▼ 3.13%
As of 8/28/2014, 04:03 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com