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US Oil & Gas Rig Tally Hits All-Time Lows for 9 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 263 in the week through Jul 2, compared with the prior-week count of 265. The current national rig count is below the prior year’s 963.

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

The number of onshore rigs in the week ending Jul 2 totaled 251 versus the previous week’s 254. However, the tally of rigs operating offshore plays through the week till Jul 2 was 12 compared with the prior-week count of 11. Notably, no rigs operated in inland waters, same as it was in the prior week.

US Removes 3 Oil Rigs: Oil rig count was 185 in the week through Jul 2 compared with 188 in the week ended Jun 26. Notably, the tally has never dropped to such a low since June 2009. Also, the tally declined for 16 consecutive weeks. Investors should also note that the current number of oil rigs, far from the peak of 1,609 attained in October 2014, is also below the year-ago 788.

Natural Gas Rig Count Increases in US: The natural gas rig count of 76 compared with the prior-week count of 75. However, the count of rigs exploring the commodity lags the prior-year week’s 174. Notably, per the latest report, the number of natural gas-directed rigs is 95.3% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 17 units, higher than the prior-week count of 15. 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) of 246 was lower than the prior-week level of 250. 

Gulf of Mexico (GoM) Rig Count Increases: The GoM rig count is 12 units, of which all were oil-directed. The count was higher than the prior-week count of 11.

Rig Count in Major Basin

Permian — the most prolific basin in the United States — saw a drop in oil rig tally by five in the week ended Jul 2. Importantly, the oil rig count dropped for 16 consecutive weeks in Permian.

Outlook

With oil prices recovering gradually, 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 consider 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 #2 (Buy). 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
 
Schlumberger Limited (SLB): Free Stock Analysis Report
 
Halliburton Company (HAL): Free Stock Analysis Report
 
Devon Energy Corporation (DVN): Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG): Free Stock Analysis Report
 
Baker Hughes Company (BKR): Free Stock Analysis Report
 
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