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Permian Basin Adds Oil Drilling Rigs for 7 Straight Weeks

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In its weekly release, Baker Hughes Company (BKR - Free Report) reported an increase in 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 the 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 U.S. Rig Count Increases: The count of rigs engaged in exploration and production of oil and natural gas in the United States was 323 for the week through Dec 4 versus the prior-week count of 320. Thus, the tally has increased in 11 of the past 12 weeks, indicating that oil and gas drillers are gradually returning to domestic shale plays. However, the current national rig count is below the year-ago level of 799.

The number of onshore rigs for the week ending Dec 4 totaled 308 compared with the prior-week count of 306. Notably, the count of rigs operating in inland waters was two, same as the prior-week tally. Moreover, in the offshore resources, 13 rigs were operating, higher than the prior-week count of 12.

The U.S. Adds 5 Oil Rigs: Oil rig count was 246 for the week through Dec 4 compared with 241 in the week ended Nov 25. Importantly, the tally has been the highest since May. 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 663.

Natural Gas Rig Count Decreases in the U.S.: Natural gas rig count of 75 was lower than the prior-week count of 77. Moreover, the count of rigs exploring the commodity was below the prior-year week’s 133. Importantly, per the latest report, the number of natural gas-directed rigs is 95.3% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 16 units, higher than the prior-week count of 15. 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 307 compared favorably with the prior-week level of 305.

Gulf of Mexico (GoM) Rig Count Increases: The GoM rig count was 13 units, of which all were oil-directed. The count was higher than the prior-week tally of 12.

Rig Count in Prolific Basins

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 163, higher than the prior-week count of 160. Thus, the basin has been adding oil drilling rigs for seven straight weeks. In the DJ-Niobrara shale play, the weekly tally for oil drilling rigs has increased to 6 from the prior-week count of 4.

Outlook

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

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

Meanwhile, investors may keep an eye on two energy stocks that are expected to benefit if the oil price rally sustains, namely 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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