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Oil Drillers Add Rigs in Permian Basin and Eagle Ford Shale

Zacks Equity Research

In its weekly release, Baker Hughes Company BKR reported an increase in the number of drilling rigs in the United States. 

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 affects demand for energy services like drilling, completion and production provided by the likes of Halliburton Company (HAL), Schlumberger Limited SLB, Diamond Offshore Drilling, Inc DO and Transocean Ltd. RIG.

Details

Total US Rig Count Increases: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 796 in the week through Jan 17, higher than the prior-week’s count of 781. The current national rig count is, however, below the prior year’s 1050.

The number of onshore rigs, in the week ending Jan 17, totaled 775 compared with the previous week’s 759. In inland waters, the count was one, in line with the week-ago tally. However, the tally of rigs operating offshore plays through the week till Jan 17 was 20, below the prior-week count of 21.

US Adds 14 Oil Rigs: Oil rig count was 673 versus 659 in the week ended Jan 10. Thus, drillers added rigs in the domestic plays after removing rigs for three successive weeks. The current total, far from the peak of 1,609 attained in October 2014, is however below the year-ago 852.

Natural Gas Rig Count increases in US: Natural gas rig count of 120 is higher than the prior-week tally of 119. However, the count of rigs exploring the commodity is lower than the prior-year week’s 198. Per the latest report, the number of natural gas-directed rigs is 92.5% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 43 units, higher than the prior-week count of 38. Moreover, the 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 753 compared with the prior-week level of 743.

Gulf of Mexico (GoM) Rig Count Declines: GoM rig count was 20 units, of which 19 were oil-directed. The count was lower than the prior-week tally of 21.

Rig Count in Major Basins

In Permian and Eagle Ford, drillers added six and two oil rigs, respectively, in the week through Jan 17. Notably, oil drillers added rigs in the most prolific basin after removing for three weeks in a row.

Outlook

Investors should know that domestic drillers may again remove rigs since explorers have a conservative capital budget in place and have decided to curb spending on drilling new wells for a second consecutive year in 2020.

Despite the bearish landscape, it would be wise for investors to keep an eye on drillers in the Permian, where more crude is being produced with lesser rigs. Two Permian drillers that investors should keep an eye on are Diamondback Energy, Inc. FANG and Pioneer Natural Resources Company PXD. While Diamondback carries a Zacks Rank #3 (Hold), Pioneer Natural carries 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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Baker Hughes Company (BKR) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
 
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Zacks Investment Research