Marcellus Shale Play Witnesses Increase in Natural Gas Rigs

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In its weekly release, Baker Hughes, a GE company BHGE reported an increase in total rig count 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 this Houston-based oilfield services player's rotary rig count hampers demand for energy services like drilling, completion and production provided by the likes of Halliburton Company HAL , Schlumberger Limited 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 981 in the week (ended Mar 2) - higher than the prior week's 978. Notably, the total count increased for four in the prior six weeks.

Since it slipped to an all-time low of 404 in May 2016, rig count has been rising rapidly in U.S. shale resources. Punctuated with a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 756.

For the week in discussion, the rise in rig count can be attributed to increased onshore operations. The number of onshore rigs were 963, higher than 959. Four rigs operated in the inland waters last week, up from the count of two for the week ended Feb 23.

However, the tally for offshore was 14, down from 17 in the prior week.

Oil Rig Count: Oil rig count of 800 was up from 799 for the week ended Feb 23. Further, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year's count of 609. It should be noted that since 2015, the count of rigs exploring for oil touched 800 for the first time.

Natural Gas Rig Count: The natural gas rig count of 181 was up from 179 for the week ended Feb 23. With this, the tally increased thrice in the last four weeks.

Moreover, like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 146.

Per the recent report, the number of natural gas-directed rigs is nearly 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 59 units decreased from 67 units. Moreover, 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 11 units to 922 units.

Gulf of Mexico (GoM): The GoM rig count is at 14 units - 13 of which were oil-directed - compared with 17 units for the week ended Feb 23.

Conclusion

The number of rigs exploring oil and natural gas in the United States increased, courtesy of the addition of two gas rigs in the Marcellus shale play.

Crude pricing scenario has been healthy after the OPEC members agreed to extend the production curb deal beyond first-quarter 2018. Given that oil has been trading mostly over the $60-per-barrel mark since January, we believe that there is considerable opportunity for U.S. shale players to continue ramping up drilling activities.

Two energy stocks that should make valuable additions to your portfolio are Continental Resources, Inc. CLR and Concho Resources Inc. CXO . 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 Oklahoma City, OK, Continental is primarily an upstream energy player. We expect the company to witness year-over-year earnings growth of 323.5% in 2018.

Headquartered in Midland, TX, Concho explores oil and gas resources in the prospective plays. The company is likely to witness year-over-year earnings growth of 73.2% in 2018.

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Weatherford International PLC (WFT): Free Stock Analysis Report

Schlumberger Limited (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

Concho Resources Inc. (CXO): Free Stock Analysis Report

Continental Resources, Inc. (CLR): 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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