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US Oil & Gas Rig Tally Rises in 5 of 6 Weeks: Here's Why

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In its weekly release, Baker Hughes Company (BKR - Free Report) reported an increase in the U.S. rig count from the prior week.

More on the Rig Count

Baker Hughes’ data, 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 impacts 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 US Rig Count Rises: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 484 for the week through Jul 16,higher than the prior-week count of 479. Thus, the tally has increased in five of the past six weeks, thanks to a massive improvement in oil price. Also, the count is the highest since April 2020. Notably, the current national rig count is higher than the year-ago level of 253.

The number of onshore rigs for the week ended Jul 16 totaled 466, higher than the prior-week count of 461. Notably, in offshore resources, 17 rigs were operating, in line with the prior-week count.

US Oil Rig Count Increases: Oil rig count was 380 for the week ended Jul 16, higher than the prior-week count of 378. Investors should also note that the current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is higher than the year-ago figure of 180.

Natural Gas Rig Count Surges in US: Natural gas rig count of 104 increased from the prior-week count of 101. Moreover, the count of rigs exploring the commodity was higher than the prior-year week’s 71. Per the latest report, the number of natural gas-directed rigs is almost 94% 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 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 466 compared favorably with the prior-week level of 464.

Gulf of Mexico (GoM) Rig Count In Line: 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 Basin

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 237, in line with the prior-week count. Importantly, the tally for oil drilling rigs in the basin increased in seven of the prior 11 weeks.

Outlook

The price of West Texas Intermediate crude, trading at more than $70 per barrel mark, has improved drastically from the pandemic-hit April last year, when oil was in the negative territory. With coronavirus vaccines being rolled out at a massive scale, the demand for fuel will possibly improve further. This has paved the way for further rig additions although drilling activities have slowed down as upstream players are focusing mainly on stockholder returns rather than boosting output.

Meanwhile, investors may keep an eye on two energy stocks that are expected to benefit if oil price continues to stay healthy — Whiting Petroleum Corporation (WLL - Free Report) and Earthstone Energy, Inc. (ESTE - Free Report) . While Whiting Petroleum carries a Zacks Rank #2 (Buy), Earthstone Energy sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.