US Oil Rig Tally Declines the Most in 5 Years: Here's Why

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 728 in the week through Mar 27, lower than the prior-week count of 772. The current national rig count is also below the prior year’s 1006.

The number of onshore rigs, in the week ending Mar 27, totaled 710 versus the previous week’s 751. Moreover, the tally of rigs operating offshore plays through the week till Mar 27 was 18, lower than the prior-week count of 19. No rigs operated in the inland waters, as compared to the prior-week count of two.

US Removes 40 Oil Rigs: Oil rig count was 624, down from 664 in the week ended Mar 20. Since April 2015, this has been the deepest weekly cut on record. Importantly, since crude prices are in the bearish territory, explorers are cutting their capital budget considerably. This led the weekly tally of oil rigs to fall to the lowest mark since March 2017. Notably, among the upstream energy players in North America that recently decided to lower their capital budget for 2020 are Occidental Petroleum Corporation OXY, Diamondback Energy, Inc. FANG and Marathon Oil Corporation MRO. Marathon Oil currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors should 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 816.

Natural Gas Rig Count Declines in US: The natural gas rig count of 102 is lower than the prior-week count of 106. Moreover, the count of rigs exploring the commodity is lower than the prior-year week’s 190. Per the latest report, the number of natural gas-directed rigs is 93.7% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 28 units, higher than the prior-week count of 27. 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 700 was lower than the prior-week level of 745.

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

Rig Count in Major Basin & Outlook

Permian — the most prolific basin in the United States — decreased oil rig tally by 23 in the week ended Mar 27. Importantly, the count of oil rigs in Permian dropped for two consecutive weeks.

Notably, domestic drillers may continue to lower rigs in the oil patches since global energy demand declined drastically owing to the coronavirus pandemic.

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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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