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American Oil & Gas Drillers Add Rigs for 10 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 384 for the week through Jan 29 versus the prior-week count of 378. Thus, the tally has increased for 10 successive weeks, indicating that oil and gas drillers are gradually returning to domestic shale plays since the commodity pricing scenario is improving. Importantly, the 10-week of rising rig tally is the longest since June 2018. However, the current national rig count is below the year-ago level of 790.

The number of onshore rigs for the week ending Jan 29 totaled 365 compared with the prior-week count of 359. Notably, the count of rigs operating in inland waters was three, same as the prior-week tally. Moreover, in offshore resources, 16 rigs were operating, flat with the prior-week count.

US Adds 6 Oil Rigs: The oil rig count was 295 for the week through Jan 29 compared with 289 in the week ended Jan 22. 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 675.

Natural Gas Rig Count Flat in US: Natural gas rig count of 88 was in line with the prior-week count. However, the count of rigs exploring the commodity was below the prior-year week’s 112. Per the latest report, the number of natural gas-directed rigs is almost 94.5% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 22 units versus the prior-week count of 18. 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 362 compared favorably with the prior-week level of 360.

Gulf of Mexico (GoM) Rig Count In Line: The GoM rig count was 16 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 192 versus the prior-week count of 188. In the Williston play, the weekly tally for oil drilling rigs has increased to 12 from the prior-week count of 11.

Outlook

The price of West Texas Intermediate crude, which is trading above $52 per barrel, has improved significantly since April 2020, when oil was in the negative territory. The momentum is likely to continue since the coronavirus vaccine rollout will possibly help the economy recover strongly this year, aiding fuel demand. Thus, oil and gas drillers are likely to continue adding rigs to shale plays since the pricing environment is gradually improving.

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 has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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