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American Oil & Gas Drillers Add Rigs for 6 Successive 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, 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 351 for the week through Dec 31 versus the prior-week count of 348. Thus, the tally has increased for six 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 796.

The number of onshore rigs for the week ending Dec 31 totaled 332 compared with the prior-week count of 329. 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, flat with the prior-week count.

US Adds 3 Oil Rigs: The oil rig count was 267 for the week through Dec 31 compared with 264 in the week ended Dec 23. 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 670.

Natural Gas Rig Count Flat in US: Natural gas rig count of 83 was in line with the prior-week count. However, the count of rigs exploring the commodity was below the prior-year week’s 123. Per the latest report, the number of natural gas-directed rigs is almost 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 334 compared favorably with the prior-week level of 331.

Gulf of Mexico (GoM) Rig Count In Line: The GoM rig count was 17 units, of which all were oil-directed. The count was in line with the prior-week tally.

Rig Count in Prolific Basins

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 175, higher than the prior-week count of 173. In the Cana Woodford play, the weekly tally for oil drilling rigs has increased to nine from the prior-week count of eight.

Outlook

Although the West Texas Intermediate crude price — trading above $47 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 this 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) . While Devon Energy carries a Zacks Rank #3 (Hold), Diamondback sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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