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Permian Oil Rig Count Decreases for Three Straight Weeks

In its weekly release, Baker Hughes Company BKR stated that the U.S. rig count was lower than the prior-week tally. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.

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. The number of active rigs and its comparison with the prior-week figure indicates the demand trajectory for the company’s oilfield services from exploration and production companies.

Details

Total U.S. Rig Count Falls: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 720 for the week ended May 19. The figure is lower than the prior week’s count of 731. The tally decreased for three straight weeks. The current national rig count is also lower than the year-ago level of 728.

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The onshore rigs in the week ended May 19 totaled 697, lower than the prior week's count of 707. In offshore resources, 21 rigs were operating, lower than the prior week’s count of 22.

U.S. Oil Rig Count Falls: The oil rig count was 575 in the week ended May 19, lower than the prior-week figure of 586. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is down from the year-ago figure of 576.

U.S. Natural Gas Rig Count Flat: Natural gas rig count of 141 is flat with the prior-week figure. The count of rigs exploring the commodity is lower than the prior-year week’s tally of 150. Per the latest report, the number of natural gas-directed rigs is 91.2% lower than the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 19 units, in line with the prior-week count. 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 701 is lower than the prior-week level of 712.

Gulf of Mexico (GoM) Rig Count Decreases: GoM rig count was 21 units, of which 20 are oil-directed. The count was lower than the prior-week number of 22.

Rig Count in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 346, lower than the prior week's count of 350. The number decreased for three straight weeks.

Outlook

The West Texas Intermediate crude price is trading at more than the $70-per-barrel mark, which is highly favorable for exploration and production activities. Solid oil prices will again likely pave the way for rig additions despite a slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output.

Investors may keep a close eye on energy stocks like EOG Resources EOG and Matador Resources Company MTDR, as the companies are expected to benefit from the current healthy oil price scenario.

EOG Resources, currently carrying a Zacks Rank #3 (Hold), is a leading oil and natural gas exploration and production company. It is well-placed to capitalize on the promising business scenario. It has an estimated 11,500 net undrilled premium locations, resulting in a brightened production outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EOG Resources is strongly committed to returning capital to shareholders. Since transitioning to premium drilling, the company has returned a handsome amount of cash to stockholders. With the employment of premium drilling, EOG can reduce its cash operating costs per barrel of oil equivalent, thereby aiding its bottom line.

Matador Resources has a strong presence in oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Promising oil price is likely to aid it in increasing production volumes. Matador acquired Advance Energy Partners Holdings, LLC, which comprises several oil and natural gas-producing properties and undeveloped acreage. MTDR, carrying a Zacks Rank of 3, expects the acquisition to be accretive to important valuation and financial metrics.

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