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American Oil & Gas Drillers Add Rigs for 5 Successive Weeks

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In the 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, which is being 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 U.S. Rig Count Increases: The count of rigs engaged in exploration and production of oil and natural gas in the United States was 348 for the week through Dec 23 versus the prior-week count of 346. Thus, the tally has increased for five successive weeks, indicating that oil and gas drillers are gradually returning to domestic shale plays since the commodity pricing scenario is getting better. However, the current national rig count is below the year-ago level of 805.

The number of onshore rigs for the week ending Dec 23 totaled 329 compared with the prior-week count of 328. Notably, the count of rigs operating in inland waters was two, same as the prior-week tally. Moreover, in offshore resources, 17 rigs were operating, higher than the prior-week count of 16.

US Adds 1 Oil Rig: The oil rig count was 264 for the week through Dec 23 compared with 263 in the week ended Dec 18. Importantly, the tally has been the highest since the mid of May. Investors should also note that the current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is below the year-ago 677.

Natural Gas Rig Count Increases in US: Natural gas rig count of 83 was higher than the prior-week count of 81. However, the count of rigs exploring the commodity was below the prior-year week’s 125. Per the latest report, the number of natural gas-directed rigs is 95% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 17 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 331 compared favorably with the prior-week level of 329.

Gulf of Mexico (GoM) Rig Count Increases: The GoM rig count was 17 units, of which all were oil-directed. The count was higher than the prior-week tally of 16.

Rig Count in Prolific Basins

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 173, in line with the prior-week count. In the Haynesville play, the weekly tally for gas drilling rigs has increased to 43 from the prior-week count of 40.

Outlook

Although the West Texas Intermediate crude price — around $48 a barrel — is significantly below the price of more than $60 at the beginning of 2020, prices have improved considerably over the past few months. The momentum is likely to continue since the coronavirus vaccine rollout and the massive pandemic aid bill that was recently signed into law by President Donald Trump have been bolstering investor confidence in a strong fuel demand rebound next year. Thus, oil and gas drillers are likely to continue adding rigs to 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 -- 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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