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Permian Basin Adds Oil Drilling Rigs for 6 Straight Weeks

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In its weekly release, Baker Hughes Company (BKR - Free Report) reported an increase in the U.S. rig count.

More on the Rig Count

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.

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 - Free Report) , Schlumberger Limited (SLB - Free Report) and Transocean Ltd. (RIG - Free Report) .

Details

Total US Rig Count Increases: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 320 in the week through Nov 25 versus the prior-week count of 310. Thus, the tally has increased in 10 of the past 11 weeks.  However, the current national rig count is below the year-ago level’s 802.

The number of onshore rigs in the week ending Nov 25 totaled 306 compared with the prior-week count of 296. Notably, the count of rigs operating in inland waters was two, same as the prior-week tally. Moreover, in the offshore resources, 12 rigs were operating, flat with the prior-week count.

The US Adds 10 Oil Rigs: Oil rig count was 241 in the week through Nov 25 compared with 231 in the week ended Nov 20. 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 level’s 668.

Natural Gas Rig Count Increases in the US: The natural gas rig count of 77 was higher than the prior-week count of 76. However, the count of rigs exploring the commodity is below the prior-year week’s 131. Importantly, per the latest report, the number of natural gas-directed rigs is 95.2% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 15 units, lower than the prior-week count of 18. However, 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 305 compares favorably with the prior-week level of 292.

Gulf of Mexico (GoM) Rig Count Flat: The GoM rig count is 12 units, of which all were oil-directed. The count was in line with the prior-week count.

Rig Count in Prolific Basins

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 160, higher than the prior-week count of 155. Thus, the basin has been adding oil drilling rigs for six straight weeks. In the Eagle Ford shale play, the weekly tally for oil drilling rigs increased to 22, from the prior-week count of 19.

Outlook

Although the price of West Texas Intermediate (WTI) crude, hovering around $45 per barrel, is significantly below the 2020-beginning price of more than the $60 mark, the commodity price has improved considerably over the past few months. The momentum is likely to continue since the market has witnessed positive vaccine results, raising hopes that fuel demand will recover soon that has so long been dented by the coronavirus pandemic.  

Thus, oil and gas drillers are likely to continue to add rigs in the shale plays since the pricing environment of the commodity is now gradually getting healthier.

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

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