The Zacks Analyst Blog Highlights: Baker Hughes, Halliburton, Schlumberger, Newpark Resources and Black Hills

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Jul 11, 2013, 09:30 ET

CHICAGO, July 11, 2013 /PRNewswire/ -- 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. (NYSE:BHI-Free Report), Halliburton Co. (NYSE:HAL-Free Report), Schlumberger Ltd. (NYSE:SLB-Free Report), Newpark Resources Inc. (NYSE:NR-Free Report) and Black Hills Corporation (NYSE:BKH-Free Report).

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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

GoM Rig Count Highest Since 2009

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (NYSE:BHI-Free Report) reported a rise in the U.S. rig count (number of rigs searching for oil and gas in the country). This upside can be attributed to an increase in the tally of both oil and natural gas-directed rigs. In particular, rigs working in the U.S. Gulf of Mexico (GoM) jumped to its highest level in 4 years.

The Baker Hughes' data, issued since 1944, acts as an important yardstick for energy service providers 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 1,757 for the week ended Jul 3, 2013 – a period curtailed by the Independence Day. This was up by 9 from the previous week's rig count and indicates the first increase in 3 weeks.

The current nationwide rig count is more than double the lowest level reached in recent years (876 in the week ended Jun 12, 2009), though it is way below the prior-year level of 1,965. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.

Rigs engaged in land operations ascended by 6 to 1,676, offshore drilling was up by 3 to 59 rigs, while inland waters activity remained steady at 22 units.

Natural Gas Rig Count: The natural gas rig count – which recently slumped to its lowest point since Jun 1995 – increased for the second successive week to 355 (a gain of 2 rigs from the previous week). Despite the weekly improvement, the number of gas-directed rigs is down by 56% from its 2012 peak of 811.

In fact, the current natural gas rig count remains 78% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 542 active natural gas rigs.

Oil Rig Count: The oil rig count – that rocketed to a 25-year high of 1,432 in Aug last year – jumped by 5 to 1,395. It has recovered strongly from a low of 179 in Jun 2009, rising 7.8 times. However, the current tally is below the previous year's rig count of 1,419.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 7 was up by 2 from the previous week.

Rig Count by Type: The number of vertical drilling rigs fell by 7 to 434, 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 up by 16 to 1,323. In particular, horizontal rig units – that reached an all-time high of 1,193 in May 2012 – edged up by 1 from the last week's level to 1,068.

Gulf of Mexico (GoM): The GoM rig count was up by 3 to 57, the highest level since Feb 2009. Oil drilling increased to 43 rigs from 40 a week ago, while gas rigs remained steady at 14.

A Key Barometer of Drilling Activity: An increase or decrease in the Baker Hughes rotary rig count heavily weighs on the demand for energy services – drilling, completion, production etc. – provided by companies that include large-cap names like Halliburton Co. (NYSE:HAL-Free Report) and Schlumberger Ltd. (NYSE:SLB-Free Report). However, our preferred pick in this group is Newpark Resources Inc. (NYSE:NR-Free Report). The Woodlands, TX-based firm – sporting a Zacks Rank #2 (Buy) – has a solid secular growth story with potential to rise from current level.

Strong Buy on Black Hills Corp.

Zacks Investment Research upgraded energy producer and marketer Black Hills Corporation (NYSE:BKH-Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

This electric utility delivered positive earnings surprises in three out of the last four quarters with an average beat of 10.43%. The long-term expected earnings growth rate for this stock is 6.0%.

Black Hills Corporation is poised to benefit from increased demand from all customer classes. The operational efficiency of this company enhances reliability of its services, increasing consumer satisfaction. This helps the company to further expand its customer base. The company also benefited from customer rate adjustments and will continue to enjoy the same over the next few quarters.

The strategic initiatives undertaken by the utility to add to its power generation capacity and drilling activities in Mancos Shale formation in the Piceance Basin will improve its natural gas production.

The financial strength of Black Hills Corporation allows it to make strategic acquisitions. The gas utility segment acquired two small systems in the first quarter, swelling its customer base by 500 retail and two high-volume industrial customers.

Moreover, the strong financial position enables Black Hills Corporation to reward its shareholders through regular dividend payments. The company has increased its annual dividend rate for 43 consecutive years.

The Zacks Consensus Estimate for 2013 increased 1.7% in the last 60 days to $2.33 per share which reflects year-over-year growth of 11.29%.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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