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Permian Oil Rig Count Falls After 2 Straight Weeks of Increase

In its weekly release, Baker Hughes Company BKR stated that the U.S. rig count was lower than the prior-week figure. 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 a week-ago figure indicates the demand trajectory for the company’s oilfield services from exploration and production companies.

Rig Count Data in Detail

Total U.S. Rig Count Declines: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 630 for the week ended Sep 22. The figure is lower than theweek-ago count of 641. The figure decreased after increasing for two straight weeks amid a slowdown in drilling activities. Some analysts think that shale producers are getting more efficient, requiring fewer rigs, while some doubt whether certain producers have enough prospective land to drill. The current national rig count is also lower than the year-ago level of 764.

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Onshore rigs in the week that ended on Sep 22 totaled 608, lower than the prior week's count of 619. In offshore resources, 19 rigs were operating, in line with the prior-week count.

U.S. Oil Rig Count Declines: The oil rig count was 507 in the week ended Sep 22, lower than the week-ago figure of 515. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is also down from the year-ago figure of 602.

U.S. Natural Gas Rig Count Falls: The natural gas rig count of 118 is lower than the week-ago figure of 121. The count of rigs exploring the commodity is also below a year-ago week’s 160. Per the latest report, the number of natural gas-directed rigs is almost 93% lower than the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 16 units, lower than the week-ago count of 17. 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 614 is lower than the prior-week level of 624.

Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count was 17 units, all oil-directed. The count was in line with the prior-week number.

Rig Count in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil rig count of 314, lower than the prior week's 319. The number decreased after increasing for two straight weeks.

Outlook

The West Texas Intermediate crude price is trading at more than the $85-per-barrel mark. Although the commodity pricing scenario is favorable for exploration and production operations, there has been a slowdown in drilling activities, which may continue, as upstream players mainly focus on stockholder returns rather than boosting output.

Despite the backdrop, investors can keep a close eye on energy stocks like EOG Resources EOG and Matador Resources Company MTDR, as these 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 many 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 the 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 #2 (Buy), expects the buyout to be accretive to important valuation and financial metrics.

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EOG Resources, Inc. (EOG) : Free Stock Analysis Report

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