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U.S. Rig Count Rises for 17 Consecutive Weeks

Zacks

Oil field services firm Baker Hughes Inc. BHI recently reported the rig count for the week ended May 12, 2017. In the U.S., the total number of rigs increased from the previous week, primarily owing to an increase in the number of land rigs. This is the 17th consecutive increase in the U.S. weekly rig count after the nation witnessed a fall in the number of rigs during the week ended Jan 13.

North America Rig Count

Total rig count in North America – the U.S. and Canada – for the week ended May 12, was 965. The reported figure was higher than 959 a week ago and 449 a year earlier.

Total U.S. Rig: Total number of rigs in the U.S. was 885. This was higher than 877 rigs in the week ended May 5, as well as 406 a year ago.


Of the total U.S. rigs, land rigs were 860. The reported figure is higher than 853 rigs in the previous week and 382 rigs in year-ago period.

The number of U.S. offshore rigs for the week ended May 12, was 21. This is higher than 19 rigs in the previous week but lower than 22 rigs in the previous year.

U.S Oil Rig Count: The count was up by nine from the previous week to 712. The number had skyrocketed to 1,609 in Oct 2014 – the highest figure to have been registered since Baker Hughes started reporting oil and natural gas rig counts separately in 1987. The tally is also well above the previous year’s rig count of 318.

U.S Natural Gas Rig Count: The count slipped by one from the last week to 172. Moreover, the current natural gas rig count is almost 90% below the high of 1,606 reached in late summer 2008. There were 87 active natural gas rigs in the year-ago period.

Canada rig: In Canada, the total rig count was 80 compared with 82 rigs in last week. There were 43 rigs a year ago.

Reasons for Improvement

In North America, only the U.S. rig count increased both from the prior week and the previous year. Texas, where rig count rose by eight, was mainly responsible for the increase in the U.S. weekly rig count.

Let’s analyze the broader factors for the increase in rig count in the U.S. Since OPEC and non-OPEC countries agreed to curb crude output amid the supply glut, oil prices jumped and nearly doubled from the lows it slipped to in last February. Also, energy ministers of Saudi Arabia and Russia held discussions to extend the OPEC deal to the end of March next year. This should further strengthen oil prices.

Given these developments, U.S. shale producers have been gathering to oil patches as they will be able to sell the commodity at higher prices. U.S. exploration and production (E&P) companies are expected to produce more, in turn, gaining a larger market share at the expense of OPEC.

Companies Poised to Benefit

U.S. E&P firms are likely to benefit the most from these developments. Our proprietary model shows that Penn Virginia Corporation PVAC, Stone Energy Corporation SGY and W&T Offshore Inc. WTI are among the upstream companies that are worth including in your portfolio. Penn Virginia sports a Zacks Rank #1 (Strong Buy), while Stone Energy and W&T Offshore carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

All the three stocks show strong pricing figure and were able to outperform the Zacks categorized Oil & Gas-U.S Exploration & Production industry, month to date. While the broader industry registered an increase 0.4% during the aforesaid period, shares of Penn Virginia, Stone Energy and W&T Offshore gained 7.4%, 1.8% and 3% respectively.

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