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 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
Rigs engaged in exploration and production in the U.S. totaled
1,858 for the week ended Jun 20, 2014. This was up by 4 from the
previous week's rig count and indicates the first increase in 3
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 1,759. It rose to a 22-year
high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep
Rigs engaged in land operations ascended by 4 to 1,784, while
inland waters activity and offshore drilling remained steady at 15
and 59 units, respectively.
Natural Gas Rig Count:
The natural gas rig count - which last week slumped to its lowest
point since May 1993 - increased for the first time in 3 weeks to
311 (a gain of 1 rig from the previous week). Despite the weekly
growth, the number of gas-directed rigs is down by 62% from its
recent peak of 811, achieved in 2012.
In fact, the current natural gas rig count remains 81% below its
all-time high of 1,606 reached in late summer 2008. In the year-ago
period, there were 349 active natural gas rigs.
Oil Rig Count:
The oil rig count was up by 3 to 1,545. 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
1,405. 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 2 remained unchanged from the previous week.
Rig Count by Type:
The number of vertical drilling rigs fell by 8 to 380, 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 12 to
1,478. In particular, horizontal rig units - that reached an
all-time high of 1,251 in May 2014 - increased by 2 from the last
week's level to 1,250.
Gulf of Mexico (GoM):
The GoM rig count was flat at 57, as both oil and gas
drilling stayed put at their week-ago levels of 45 and 12,
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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