Markets

Permian Basin Witnesses Removal of 4 Oil Drilling Rigs

In its weekly release, Baker Hughes, a GE company BHGE reported a decline in the U.S. rig count.

More on the Rig Count

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

A change in the Houston-based oilfield services players' rotary rig count impacts demand for energy services like drilling, completion and production provided by the likes of Halliburton Company (HAL), Schlumberger Limited SLB , Diamond Offshore Drilling, Inc. DO and Transocean Ltd. RIG .

Details

Total U.S. Rig Count Decreases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1075 in the week ended Dec 7, lower than 1076 in the prior week. This marks a fall in rig count for three consecutive weeks.

Despite the rig count slipping to an all-time low of 404 in May 2016, it has been rising rapidly in U.S. shale resources. The current national rig count is higher than the prior-year level of 931.

For the week under review, the fall in rig count can be attributed to decreased onshore operations. The number of onshore rigs totaled 1050, down from 1051 in the previous week. The tally for offshore and inland water rigs, however, was in line with the counts for the week ended Nov 30. Through the week ended Dec 7, two rigs operated in the inland waters, while the count for offshore rigs was 23.

U.S. Removes 10 Oil Rigs: Oil rig tally was 877, down from 887 in the week ended Nov 30. The fall in weekly count for crude has been the highest since May 2016.

However, the current total, though far from the peak of 1,609 attained in October 2014, is significantly higher than last year's 751.

Natural Gas Rig Count Increases in the United States: The natural gas rig count of 198 rose from the tally of 189 for the week ended Nov 30.

Moreover, like oil, the count of rigs exploring the commodity is above the prior-year number of 180. Notably, per the recent report, the number of natural gas-directed rigs is almost 88%, below the all-time high of 1,606 in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 70 units, down from the previous week's 74. However, the horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations also known as shale formations) increased by three units to 1,005.

Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count is 23 units, of which 18 were oil directed. The count was in line with the tally for the week ended Nov 30.

Conclusion

The Permian basin saw the removal of four oil rigs, primarily dragging the weekly oil count down.

Investors should know that low oil , trading below $55 per barrel, is not a slippery affair for U.S. shale producers. With the advancement of technologies, well costs have declined drastically. Also, upstream energy players, with operations in key domestic shale plays, have hedged part of their 2018 and 2019 liquid volumes - claimed energy research and consulting group Wood Mackenzie. These developments will likely insulate some of the key shale players - like Concho Resources Inc. CXO and Whiting Petroleum Corporation WLL - against the weak crude landscape. Both the shale players carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

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

Schlumberger Limited (SLB): 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

Whiting Petroleum Corporation (WLL): Free Stock Analysis Report

Baker Hughes, a GE company (BHGE): Free Stock Analysis Report

To read this article on Zacks.com click here.

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.

In This Story

SLB WLL RIG DO

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More