In its weekly release, Houston-based oilfield services company Baker Hughes Inc. BHI reported a record fall in the U.S. rig count (number of rigs searching for oil and gas in the country) from the previous week. The decline stemmed from a lower number of gas-directed rigs. The West Texas Intermediate (WTI) oil futures are currently trading at around $39 per barrel.
Analysis of the Data
Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 476 in the week ended Mar 18, 2016. This was down by four units from the previous week and was an all-time low.
The current nationwide rig count is still less than half the prior-year level of 1,069. Notably, the count had risen to a 22-year high in 2008, peaking at 2,031 in the weeks ended Aug 29 and Sep 12.
Rigs engaged in land operations were 446 against 450 in the previous week. Inland water activity involved three rigs, flat with the prior week. Offshore drilling was also flat at 27 units.
Natural Gas Rig Count: The count was down by five from the past week to 89. Per the latest report, the number of natural gas-directed rigs has fallen to almost three-fourth its highest count of 811 reached in 2012. In fact, the current natural gas rig count is almost 80% below the all-time high of 1,606 in late summer 2008. In the year-ago period, there were 242 active natural gas rigs.
Oil Rig Count: The count rose by one from the previous week to 387. Interestingly, the number had skyrocketed to 1,609 in Oct 2014 – the highest figure to have been reported since Baker Hughes started breaking up the oil and natural gas rig counts in 1987. The current tally not only lies on the lower end of the five-year range, but is also well below the previous year’s rig count of 825.
Rig Count by Type: The number of vertical drilling rigs rose by three to 58, while 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) was down by seven to 418.
Gulf of Mexico (GoM): The GoM rig count was flat at 26 units.
Conclusion
Key Barometer of Drilling Activity: The Baker Hughes data, issued since 1944, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.
An increase or decrease in the Baker Hughes rotary rig count weighs heavily on demand for energy services like drilling, completion and production provided by companies that include large-cap firms such as Halliburton Co. HAL, Schlumberger Ltd. SLB and Weatherford International plc WFT.
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 >>
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
Be the first to comment