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US Oil & Gas Rig Tally Hits Record Lows for 8 Straight Weeks

Zacks

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, Diamond Offshore Drilling, Inc DO 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 265 in the week through Jun 26, compared with the prior-week count of 266. The current national rig count is below the prior year’s 967.

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

The number of onshore rigs in the week ending Jun 26 totaled 254 versus the previous week’s 255. However, the tally of rigs operating offshore plays through the week till Jun 26 was 11, 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 188 in the week through Jun 26, compared with 189 in the week ended Jun 19. Notably, the tally has never dropped to such a low since June 2009. Also, the tally declined for 15 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 793.

Natural Gas Rig Count Flat in US: The natural gas rig count of 75 was in line with the prior-week count. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 173. 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 15 units, higher than the prior-week count of 14. 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 250 was lower than the prior-week level of 252.

Gulf of Mexico (GoM) Rig Count In Line: The GoM rig count is 11 units, of which all were oil-directed. The count was in line with the prior-week count.

Rig Count in Major Basins

Permian — the most prolific basin in the United States — saw a drop in oil rig tally by one in the week ended Jun 26. Importantly, the oil rig count dropped for 15 consecutive weeks in Permian. Moreover, drillers in the DJ-Niobrara shale play lowered oil rig count by one.

Outlook

With oil prices recovering gradually – West Texas Intermediate crude has recovered almost 11% in the past month – most analysts opine that the decline in weekly rig count will slow 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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