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US Oil & Gas Rig Tally Hits Record Lows for 11 Straight Weeks

In its weekly release, Baker Hughes Company BKR reported a drop 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 service player’s rotary rig count affects demand for energy services like drilling, completion and production, provided by the likes of Halliburton Company HAL, Schlumberger Limited SLB and Transocean Ltd. RIG.

Details

Total US Rig Count Falls: Rigs engaged in the exploration and production of oil and natural gas in the United States fell to an all-time low of 253 in the week through Jul 17, compared with the prior-week count of 258. The current national rig count is below the prior year’s 954.

Investors should know that with the recent all-time low mark, the tally has touched record-low levels for 11 successive weeks, thanks to dented global energy demand owing to the coronavirus pandemic.

The number of onshore rigs in the week ending Jul 17 totaled 241 versus the previous week’s 246. However, the tally of rigs operating offshore plays through the week till Jul 17 was 12, in line with the prior-week count. Notably, no rigs operated in inland waters, same as it was in the prior week.

US Removes 1 Oil Rig: Oil rig count was 180 in the week through Jul 17, compared with 181 in the week ended Ju1 10. Notably, the tally has never dropped to such a low since June 2009. Also, the tally declined for 18 consecutive weeks. Investors should also note that the current tally of oil rigs, far from the peak of 1,609 attained in October 2014, is also below the year-ago 779.

Natural Gas Rig Count Decreases in US: The natural gas rig count of 71 was lower than the prior-week count of 75. Notably, the tally has never dropped to such a low mark since 1987, when Baker Hughes separated its oil and gas rig count. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 174. Importantly, per the latest report, the number of natural gas-directed rigs is 95.6% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 15 units, lower than the prior-week count of 19. Moreover, 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 238 was lower than the prior-week level of 239. 

Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count is 12 units, of which all were oil-directed. The count was in line with the prior-week count.

Rig Count in The most Prolific Basin

Permian — the most prolific basin in the United States — saw a drop in oil rig tally by one in the week ended Jul 17. Importantly, the oil rig count dropped for 18 consecutive weeks in Permian.

Outlook

With oil prices recovering rapidly – the West Texas Intermediate (WTI) crude has improved more than 215% since late April – most analysts opine that the decline in weekly rig count will narrow down further. In fact, some analysts believe that if the recovery sustains, since more people are getting back to work on easing lockdown measures, many explorers will consider adding rigs.

Meanwhile, investors may keep an eye on two energy stocks which are expected to benefit if the oil price rally sustains – Devon Energy Corporation DVN and Diamondback Energy Inc. FANG. Both the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Transocean Ltd. (RIG): Free Stock Analysis Report

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