In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company BHGE, reported an increase in crude rig count in the United States. The number of rigs exploring natural gas, however, declined from the prior week.

About the Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, helps energy service providers gauge the overall business environment of the oil and gas industry.

Change in Baker Hughes’ rotary rig count heavily dents demand for energy services like drilling, completion, production, etc., provided by companies like Halliburton Company HAL, Schlumberger Ltd. SLB, Weatherford International plc WFT, Diamond Offshore Drilling, Inc. DO and Transocean Ltd. RIG.

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 923 in the week ended Nov 22 — higher than the prior week’s 915. This marked an increase for three consecutive weeks after the tally fell for five weeks in a row.

Since it slipped to an all-time low of 404 last May, rig count has been rising rapidly in U.S. shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 593.

For the week in discussion, the rise in rig count can be attributed to increased onshore and offshore operations. The count of rigs engaged in offshore works rose from 21 to 22, while the tally for onshore activities jumped to 900 from 893.

One rig operated in the inland waters last week. The count remains the same this week.

Oil Rig Count: Oil rig count of 747 was higher than 738 in the prior week. Also, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 474.   

Natural Gas Rig Count: The natural gas rig count — which plunged to its lowest last August — fell by one unit to 176. However, like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 118.  

As per the most recent report, the number of natural gas-directed rigs is 89% below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs increased by three units to 66, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) increased by five units to 857.

Gulf of Mexico (GoM): The GoM rig count stands at 22 units — 18 of which were oil-directed — higher than the prior count of 21.

Conclusion

The number of rigs exploring oil in the United States has increased, while the same for natural gas decreased. Overall total oil and gas rig count has increased, primarily supported by the addition of two rigs in the Permian basin. DJ-Niobrara basin witnessed a rig addition for upstream operations.   

A rise in total rig count, both from the year-ago and prior week figures, were primarily supported by rising oil and natural prices. Recently, crude and gas traded at $58.11 per barrel and $2.93 per million Btu respectively, higher than last year’s average marks of $43.29 and $2.52 – per The U.S. Energy Information Administration (EIA). Investors should know that lower U.S. oil inventory, owing to ramp up in export and more demand from refinery plants, supported the crude price.

Recovering commodity prices are likely to prove beneficial for oil and gas exploration and production companies. Two oil stocks that should make valuable additions to your portfolio are Denbury Resources Inc. DNR and Northern Oil and Gas, Inc. NOG. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.   

Headquartered in Plano, TX, Denbury explores oil and gas resources in the Gulf Coast areas. The company posted an average positive earnings surprise of 125% for the last four quarters.

Based in Minnetonka, MN, Northern Oil and Gas is primarily engaged in exploration and development activities. We expect the company to see year-over-year revenue growth of 47.3% in 2017.  

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Weatherford International PLC (WFT): Free Stock Analysis Report
 
Schlumberger N.V. (SLB): Free Stock Analysis Report
 
Halliburton Company (HAL): Free Stock Analysis Report
 
Transocean Ltd. (RIG): Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO): Free Stock Analysis Report
 
Denbury Resources Inc. (DNR): Free Stock Analysis Report
 
Northern Oil and Gas, Inc. (NOG): Free Stock Analysis Report
 
Baker Hughes Incorporated (BHGE): Free Stock Analysis Report
 
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