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Cana Woodford & Permian Witness Lower Oil Drilling Rigs

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In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company BHGE , reported a decline in total rig counts in the United States.

About the Rig Count

Baker Hughes' data, issued since 1944 at the end of every week, helps energy service providers gauge the overall business environment of the oil and gas industry.

Change in Baker Hughes' rotary rig count dents demand for energy services like drilling, completion and production provided by the likes of Halliburton Company HAL , Schlumberger Ltd. SLB , Weatherford International plc WFT , Diamond Offshore Drilling, Inc. DO and Transocean Ltd. RIG .

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 930 in the week ended Dec 15 - lower than the prior week's 931. This marked the decrease for the first time after the tally rose for five weeks in a row.

Since the all-time low of 404 last May, rig count has been rising rapidly in U.S. shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 637.

For the week in discussion, the fall in rig count can be attributed to decreased offshore operations. The count of rigs engaged in offshore works fell from 20 to 19. The tally for onshore and inland activities remained in line with the count for the week ended Dec 8.

Two rigs operated in the inland waters last week, while 909 rigs worked onshore.

Oil Rig Count: Oil rig count of 747 was lower than 751 in the prior week. However, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year's count of 510.

Natural Gas Rig Count: The natural gas rig count - which plunged to its lowest last August - of 183, was up from 180 for the week ended Dec 8. Moreover, like oil, the rig count for gas exploration sits comfortably above the year-ago tally of 126.

As per the latest report, the number of natural gas-directed rigs is almost 89% below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs of 60 units fell from 64. However, 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) increased by three units to 870.

Gulf of Mexico (GoM): The GoM rig count stands at 19 units - 15 of which were oil-directed. The present count shows a decline from 20 units recorded in the week ended Dec 8.

Conclusion

The number of rigs exploring oil in the United States has decreased, while the same for natural gas went up. The total oil and gas rig count slipped, thanks to the removal of four rigs from Cana Woodford shale and three from the Permian basin.

Rig counts have recently snapped a five-week streak of gains. However, it is difficult to say whether the tally will continue to fall in the coming weeks. This is because the crude pricing scenario is healthy and OPEC's November production has touched a six-month low, per the monthly oil market report of the cartel.

Two oil stocks that should make valuable additions to your portfolio are Northern Oil and Gas, Inc. NOG and Lonestar Resources US Inc. LONE . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Based in Minnetonka, MN, Northern Oil and Gas is primarily engaged in exploration and development activities. We expect the company to see year-over-year revenue growth of 47.3% in 2017.

Headquartered in Fort Worth, TX, Lonestar explores oil and gas resources in the domestic shale plays. The company will likely witness year-over-year earnings growth of 81.3% in 2017.

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Weatherford International PLC (WFT): Free Stock Analysis Report

Schlumberger N.V. (SLB): Free Stock Analysis Report

Halliburton Company (HAL): Free Stock Analysis Report

Transocean Ltd. (RIG): Free Stock Analysis Report

Diamond Offshore Drilling, Inc. (DO): Free Stock Analysis Report

Northern Oil and Gas, Inc. (NOG): Free Stock Analysis Report

Lonestar Resources US Inc. (LONE): Free Stock Analysis Report

Baker Hughes Incorporated (BHGE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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