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US Oil Drillers Continue to Add Rigs Despite Weak Crude Price

Zacks Equity Research

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 Decreases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 792 in the week through Mar 13, lower than the prior-week count of 793. The current national rig count is also below the prior year’s 1026.

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The number of onshore rigs, in the week ending Mar 13, totaled 771 versus the previous week’s 768. However, the tally of rigs operating offshore plays through the week till Mar 13 was 19, lower than the count of 23 through the week ended Mar 6. In the inland waters, the count was two, in line with the prior week.

US Adds 1 Oil Rig: Oil rig count was 683, up from 682 in the week ended Mar 6. Importantly, in the past six weeks, drillers increased the tally five times despite a conservative capital spending budget and weak crude pricing environment. The current total, far from the peak of 1,609 attained in October 2014, is, however, below the year-ago 833.

Natural Gas Rig Count Declines in US: The natural gas rig count of 107 is lower than the prior-week count of 109. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 193. Per the latest report, the number of natural gas-directed rigs is 93.3% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 31 units, lower than the prior-week count of 34. 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 761 was higher than the prior-week level of 759.

Gulf of Mexico (GoM) Rig Count Declines: The GoM rig count is 19 units, of which 18 were oil-directed. The count was lower than the prior-week tally of 23.

Rig Count in Major Basin & Outlook

Permian — the most prolific basin in the United States — increased oil rig tally by three in the week ended Mar 13. Importantly, the count of oil rigs in Permian increased for five consecutive weeks.

Investors should know that domestic drillers may again lower rigs in the oil patches as they have a conservative capital budget. Among the upstream energy players in North America that recently decided to lower their capital budget for 2020 — since oil prices are weak as global energy demand has softened owing to the coronavirus outbreak — are Marathon Oil Corporation MRO, Diamondback Energy, Inc. FANG and Occidental Petroleum Corporation OXY. Occidental Petroleum currently carries 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
 
Marathon Oil Corporation (MRO) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
 
Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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Zacks Investment Research