Total US Drilling Rig Tally Declines: Here's What It Means

In its weekly release, Baker Hughes Company BKR stated that the U.S. rig count was lower than the prior week’s figure. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.

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. The number of active rigs and its comparison with the week-ago figure indicates the demand trajectory for the company’s oilfield services from exploration and production companies.

Rig Count Data in Detail

Total U.S. Rig Count Declines: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 603 in the week ended May 10, lower than theweek-ago count of 605. The current national rig count was also lower than the year-ago level of 731, reflecting the fact that there has been a slowdown in drilling activities. Some analysts see this downside as a sign of increased efficiency among shale producers, who may need fewer rigs. However, there are doubts among a few about whether certain producers have sufficient promising land for drilling.

Onshore rigs in the week that ended on May 10 totaled 584, lower than the prior week's count of 587. In offshore resources, 19 rigs were operating, which increased from the week-ago count of 18.

U.S. Oil Rig Count Declines: The oil rig count was 496 in the week ended May 10, decreasing from the week-ago figure of 499. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is also down from the year-ago figure of 586.

U.S. Natural Gas Rig Count Rises: The natural gas rig count of 103 was higher than the week-ago figure of 102. The count of rigs exploring the commodity was, however, below the year-ago week’s tally of 141. Per the latest report, the number of natural gas-directed rigs is almost 93.6% lower than the all-time high of 1,606 recorded in 2008. 

Rig Count by Type: The number of vertical drilling rigs totaled 15 units, higher than the week-ago count of 13 units. 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) of 588 was lower than the prior-week level of 592.

Rig Count in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil and gas rig count of 314, lower than the week-ago figure of 316. The count is also below the prior-year level of 353.

Outlook

The West Texas Intermediate crude price is trading close to the $80-per-barrel mark. Although the commodity pricing scenario is favorable for exploration and production operations, there has been a slowdown in drilling activities, which may continue as upstream players are prioritizing stockholder returns rather than boosting output.

Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks like Diamondback Energy, Inc. FANG and Matador Resources Company MTDR.

Diamondback Energy, a leading pure-play Permian operator, reported ongoing enhancements in the average productivity per well in the Midland Basin. The exploration and production company expects to maintain growth in production volumes, benefiting from favorable commodity pricing conditions. FANG, carrying a Zacks Rank #3 (Hold), also has an investment-grade balance sheet. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Matador Resources has a strong presence in the oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Promising oil prices are likely to aid it in increasing production volumes. In fact, Matador, currently carrying a Zacks Rank #2 (Buy), is expecting oil production growth of 23% this year.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Free: See Our Top Stock And 4 Runners Up

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

Baker Hughes Company (BKR) : Free Stock Analysis Report

Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report

Matador Resources Company (MTDR) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.