For Immediate Release
Chicago, IL – February 15, 2012 – Zacks.com announces the list
of stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include Baker Hughes
Inc. (BHI), Transocean
Inc. (RIG), Helmerich &
Payne (HP), Chesapeake
Energy (CHK) and ExxonMobil
Corporation (XOM).
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Here are highlights from Tuesday’s Analyst
Blog:
Nat Gas Rig Count at 28-Month Low
In its weekly release, Houston-based oilfield services
company Baker Hughes Inc. (BHI) reported
a dip in the U.S. rig count (number of rigs searching for oil and
gas in the country). This can be primarily attributed to a decrease
in the tally of natural gas-directed rigs, partially offset by an
improved oil rig count.
The Baker Hughes rig count, issued since 1944, acts as an
important yardstick for drilling contractors such
as Transocean
Inc. (RIG) and Helmerich
& Payne (HP) in gauging the overall business
environment of the oil and gas industry.
Analysis of the Data
Weekly Summary: Rigs engaged in
exploration and production in the U.S. totaled 1,989 for the week
ended February 10, 2012. This was down by 8 from the previous
week’s count and represents the second successive decline.
Despite this, the current nationwide rig count is more than
double that of the 6-year low of 876 (in the week ended June 12,
2009) and significantly exceeds the prior-year level of 1,721. It
rose to a 22-year high in 2008, peaking at 2,031 in the weeks
ending August 29 and September 12.
Rigs engaged in land operations descended by 6 to 1,932, while
offshore drilling was down by 2 to 40 rigs. Meanwhile, inland
waters activity remained steady at 17 units.
Natural Gas Rig Count: The natural gas rig
count decreased for the fifth week in a row to 720 (a drop of 25
rigs from the previous week). As per the most recent report, the
number of gas-directed rigs is at their lowest level since October
2, 2009 and is down more than 23% from its 2011 peak of 936,
reached during mid-October.
The current natural gas rig count remains 55% below its all-time
high of 1,606 reached in late summer 2008, but has rebounded
strongly after bottoming out to a 7-year low of 665 on July 17,
2009. In the year-ago period, there were 906 active natural gas
rigs.
Oil Rig Count: The oil rig count was up by
18 to 1,263. The current tally – the highest since Baker Hughes
started breaking up oil and natural gas rig counts in 1987 – is way
above the previous year’s rig count of 805. It has recovered
strongly from a low of 179 in June 2009, rising over 7 times.
Miscellaneous Rig Count: The miscellaneous
rig count (primarily drilling for geothermal energy) at 6 was down
by 1 from the previous week.
Rig Count by Type: The number of vertical
drilling rigs fell by 3 to 603, 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) was down by 5 at 1,386. In particular,
horizontal rig units – that reached an all-time high of 1,185 in
January this year – fell by 3 from last week’s level to 1,174.
To Conclude
As mentioned above, the natural gas rig count has been falling
since the last few weeks, 214 rigs in fact (or 23%) from the recent
highs of 934 in October 28. Is this bullish for natural gas
fundamentals? The answer is "no," if we look at the U.S. production
and the shift in rig composition.
With horizontal rig count – the technology responsible for the
abundant gas drilling in domestic shale basins – currently close to
its all-time high, output from these fields remains robust. As a
result, gas inventories still remain at elevated levels – up 33%
from both last year and the five-year average.
In fact, natural gas prices have dropped more than 50% from 2011
peak of about $5.00 per million Btu (MMBtu) in June to the current
level of around $2.45 (referring to spot prices at the Henry Hub,
the benchmark supply point in Louisiana).
In the absence of major production cuts or a stronger economy to
boost industrial demand, which is responsible for almost a third of
gas consumption, we do not expect much upside in gas prices in the
near term. This is prompting more and more companies to alter their
spending patterns, away from gas to the more profitable
liquids-rich projects.
For example, Oklahoma-based Chesapeake
Energy (CHK) – the second-largest U.S. producer of
natural gas behind ExxonMobil
Corporation (XOM) – declared last week that it had
already slashed more than 500 million cubic feet per day of output
and may eventually raise volume cutbacks to as much as 1 billion
cubic feet per day if prices stay low.
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BAKER-HUGHES (BHI): Free Stock Analysis Report
CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
HELMERICH&PAYNE (HP): Free Stock Analysis Report
TRANSOCEAN LTD (RIG): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
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