Permian Witnesses Addition of Oil Rigs for 2 Straight Weeks

In its weekly release, Baker Hughes Company BKR reported an increase in the U.S. rig count.

More on the Rig Count

Baker Hughes’ data, which is issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry.

A change in the Houston-based oilfield service player’s rotary rig count affects demand for energy services like drilling, completion and production, provided by the likes of Halliburton Company HAL, Schlumberger Limited SLB, along with Transocean Ltd. RIG.

Details

Total U.S. Rig Count Increases: The count of rigs engaged in exploration and production of oil and natural gas in the United States was 403 for the week through Mar 5 versus the prior-week figure of 402. However, the current national rig count is below the year-ago level of 793.

The number of onshore rigs for the week ended Mar 5 totaled 389 compared with the prior-week count of 385. Notably, no rig operated in inland waters, same as the prior week. However, in offshore resources, 14 rigs were operating versus the prior-week count of 17.

US Adds 1 Oil Rig: Oil rig count was 310 for the week through Mar 5 compared with 309 in the week ended Feb 26. Investors should also note that the current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is, however, below the year-ago figure of 682.

Natural Gas Rig Count Flat in US: Natural gas rig count of 92 was flat with the prior-week count. However, the count of rigs exploring the commodity was below the prior-year week’s 109. Per the latest report, the number of natural gas-directed rigs is almost 94.3% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 25 units, in line with the prior-week count. Moreover, 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 378 compared favorably with the prior-week level of 377.

Gulf of Mexico (GoM) Rig Count Decreases: GoM rig count was 14 units, of which all were oil-directed. The count was lower than the prior-week tally of 17.

Rig Count in Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 210 versus the prior-week count of 207. Thus, the tally for oil drilling rigs in the basin increased for two weeks in a row.

Outlook

The price of West Texas Intermediate crude, which is trading above $67 per barrel (at pre-pandemic levels), has improved significantly since April 2020, when oil was in the negative territory. The momentum is likely to continue since the coronavirus vaccine rollout will possibly help the economy recover strongly this year, thereby aiding fuel demand. Recently, the price of oil jumped to record levels in more than a year after it was decided by OPEC+ (OPEC and its non-OPEC partners) that they will extend most of the oil output cuts till April. Thus, oil and gas drillers are likely to continue adding rigs to shale plays since the pricing environment has improved drastically.

Meanwhile, investors may keep an eye on two energy stocks that are expected to benefit if the oil price rally sustains — Devon Energy Corporation DVN and Diamondback Energy Inc. FANG. While Devon Energy carries a Zacks Rank #3 (Hold), Diamondback has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
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Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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