Oil field services firm Baker Hughes Inc. BHI recently reported the rig count for the week ended Mar 17, 2017. In the U.S., the total number of rigs increased from the previous week, primarily owing to an increase in the number of land rigs. This represents the ninth consecutive increase in the U.S. weekly rig count after the nation witnessed a fall in the number of rigs during the week ended Jan 13.
North America Rig Count
Total rig count in North America – the U.S. and Canada – for the week ended Mar 17, 2017, was 1065. The reported figure was lower than 1083 a week ago but significantly higher than the year-earlier figure of 545.
Total U.S. rig: Total number of rigs in the U.S. was 789. This was higher than 768 rigs in the week ended Mar 10, and 476 during the year-ago period.
Of the total U.S. rigs, land rigs were 765. This is higher than 743 rigs in the previous week and 446 rigs in year-ago period.
The number of U.S. offshore rigs for the week ended Mar 17, was 19. This was lower than 20 rigs in the previous week and 27 rigs in the previous year.
U.S Oil Rig Count: The count was up by 14 from the previous week to 631. The number had skyrocketed to 1,609 in Oct 2014 – the highest figure to have been reported since Baker Hughes started breaking up oil and natural gas rig counts in 1987. The tally is also well above the previous year’s rig count of 387.
U.S Natural Gas Rig Count: The count improved by six from the last week to 157. However, the current natural gas rig count is more than 90% below the high of 1,606 reached in late summer 2008. We note that the company had recorded 89 active natural gas rigs in the year-ago period.
Canada rig: In Canada, the total rig count was 276 compared with 315 rigs in last week but higher than 69 a year ago.
What Drove the Improvement?
In North America, only the U.S. rig count increased both from the prior week and the previous year. Oklahoma, where rig count rose by 10, was the main growth driver of the U.S. weekly rig count. Moreover, North Dakota added five rigs to the U.S. count.
Let’s analyze the broader factor for the increase in rig count in the U.S. Since OPEC and non-OPEC countries agreed to curb crude output amid the supply glut, oil prices jumped and nearly doubled from the lows it slipped to in last February, to around $50 a barrel. Analysts now expect the OPEC deal to be extended beyond Jun 2017, further strengthening oil prices.
Given these developments, U.S. shale producers have been gathering to oil patches as they will be able to sell the commodity at higher prices. In other words, U.S. exploration and production (E&P) companies are expected to produce more and hence, could gain market share at the expense of OPEC, amid increasing oil prices.
Companies Poised to Benefit
U.S. E&P firms will likely benefit the most from these developments. Our proprietary model shows that Pioneer Natural Resources Company PXD, Abraxas Petroleum Corporation AXAS, Comstock Resources Inc. CRK and Sanchez Energy Corporation SN are among the upstream companies that are worth including in your portfolio. Pioneer Natural sports a Zacks Rank #1 (Strong Buy), while Abraxas Petroleum, Comstock and Sanchez Energy carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
All the stocks show strong pricing figure and were able to outperform the Zacks categorized Oil & Gas-U.S Exploration & Production industry over the last one year. While the broader industry gained 11.3% during the aforesaid period, shares of Pioneer, Abraxas Petroleum, Comstock and Sanchez Energy gained 30.2%, 75.2%, 121.2% and 68.7%, respectively.
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Baker Hughes Incorporated (BHI): Free Stock Analysis Report
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Sanchez Energy Corporation (SN): Free Stock Analysis Report
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