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US Oil & Gas Drillers Add Rigs for 7 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 has been 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 this 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 Rises: The count of rigs engaged in exploration and production of oil and natural gas in the United States was 360 for the week through Jan 8 compared with the prior-week total of 351. Thus, the tally remained higher for seven 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 781.

The number of onshore rigs for the week ending Jan 8 totaled 341 compared with the prior week’s 332. 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 8 Oil Rigs: The oil rig count was 275 for the week through Jan 8 compared with 267 in the week ended Dec 31. 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 record of 659.

Natural Gas Rig Count Rises in US: Natural gas rig count of 84 was higher than the prior-week figure of 83. However, the count of rigs exploring the commodity was below the prior-year week’s 119. 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 18 units, higher than the prior-week count of 17. 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 342 compared favorably with the prior-week level of 334.

Gulf of Mexico (GoM) Rig Count in Line: The GoM rig count was 17 units, of which all were oil-directed. The count matched 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 179, higher than the prior-week number of 175. Thus, the count rose for two weeks in a row. In the Cana Woodford play, the weekly tally for oil drilling rigs improved to 10 from the prior-week count of nine.

Outlook

Although the West Texas Intermediate crude price — trading above $51 a barrel — is below the price of more than $60 at the beginning of 2020, prices have flared up considerably over the past few months.

The momentum is likely to continue with the recent coronavirus vaccine rollout and the massive pandemic aid bill that was lately signed into law by President Donald Trump. These positives have already been bolstering investor confidence in a strong fuel demand rebound this year.

The recent surge in the commodity price was also supported by a surprise move by Saudi Arabia that will see the kingdom unilaterally cut 1 million barrels of crude production every day starting this February through March. 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, namely Devon Energy Corporation (DVN - Free Report) and Diamondback Energy Inc. (FANG - Free Report) , which are expected to benefit if the oil price rally sustains. While Devon Energy carries a Zacks Rank #3 (Hold), Diamondback sports a Zacks Rank #1 (Strong Buy), presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

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