Permian & Williston Basins See Removal of 3 Oil Rigs Each

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Although expectations of milder-than-expected December temperatures hinted at softening consumption, we believe natural gas is still supported by a robust long-term growth narrative.

In its weekly release, Baker Hughes, a GE company BHGE reported a decline 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 services players’ rotary rig count impacts 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 U.S. Rig Count Decreases:  Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1071 in the week ended Dec 14, lower than 1075 in the prior week. This marks a fall in rig count for four consecutive weeks.

Despite the rig count slipping to an all-time low of 404 in May 2016, it has been rising rapidly in U.S. shale resources. The current national rig count is higher than the prior-year level of 930.

For the week under review, the fall in rig count can be attributed to decreased onshore operations. The number of onshore rigs totaled 1045, down from 1050 in the previous week. However, the tally for offshore activities was recorded at 23, in line with the count for the week ended Dec 7. Through the week ended Dec 14, three rigs operated in the inland waters, higher than the prior week’s count of two.

U.S. Removes Four Oil Rigs: Oil rig tally was 873, down from 877 in the week ended Dec 7. Thus, the tally fell for two weeks in a row.

However, the current total, though far from the peak of 1,609 attained in October 2014, is significantly higher than last year’s 747.

Natural Gas Rig Count Flat in the United States: The natural gas rig count of 198 was in line with the count for the week ended Dec 7.

Moreover, like oil, the count of rigs exploring the commodity is above the prior-year number of 183. Notably, per the recent report, the number of natural gas-directed rigs is almost 88%, below the all-time high of 1,606 in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 71 units, up from the previous week’s 70. 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) decreased by five units to 1,000.

Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count is 23 units, of which 19 were oil-directed. The count was in line with the tally for the week ended Dec 7.

Conclusion

Each of the Permian and Williston basins saw the removal of three oil rigs, primarily dragging the weekly oil count down.

Investors should know that low West Texas Intermediate (WTI) crude price, below $55 per barrel, is not a slippery affair for U.S. shale producers. With the advancement of technologies, well costs have declined drastically. Also, upstream energy players, with operations in key domestic shale plays, have hedged part of their 2018 and 2019 liquid volumes — claimed energy research and consulting group Wood Mackenzie. These developments will likely insulate some of the key shale players — Concho Resources Inc. CXO and Whiting Petroleum Corporation WLL — against the weak crude landscape. Both the shale players carry 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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Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Whiting Petroleum Corporation (WLL) : Free Stock Analysis Report
 
Concho Resources Inc. (CXO) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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