In its weekly release, Houston-based oilfield services company
Baker Hughes Inc.
) reported a marginal 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 oil-directed rigs, partially offset
by lower gas rig count.
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
1,874 for the holiday-shortened week ended Jul 3, 2014. This was up
by 1 from the previous week's rig count and indicates the third
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 1,757. 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 2 to 1,802, offshore
drilling was down by 1 to 54 rigs, while inland waters activity
remained steady at 18 units.
Natural Gas Rig Count:
The natural gas rig count - which last month slumped to its lowest
point since May 1993 - decreased for the first time in 3 weeks to
311 (a drop of 3 rigs from the previous week). As per the most
recent report, the number of natural gas-directed rigs is down 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 355 active natural gas rigs.
Oil Rig Count:
The oil rig count was up by 4 to 1,562. 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
1,395. 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 remained unchanged from the previous week.
Rig Count by Type:
The number of vertical drilling rigs rose by 3 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 down by 2 to
1,490. However, horizontal rig units increased by 5 from the last
week's level to reach an all-time high of 1,268.
Gulf of Mexico (GoM):
The GoM rig count was down by 1 to 53. Oil drilling units remained
flat at 41 rigs, while gas rigs decreased from their week-ago level
by 1 to 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
Flotek Industries 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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