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Oil Drilling Rigs Continue to Rise in Permian Basin

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In its weekly release, Baker Hughes BHGE, a GE company, reported an increase in rig count in the United States.

About 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.

Change in this Houston-based oilfield services player’s rotary rig count impacts 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

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1062 in the week (ended Jun 8) compared with the prior week’s 1060. Notably, total count increased 13 times in the last 14 weeks.

Since it slipped to an all-time low of 404 in May 2016, rig count has been rising rapidly in U.S. shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 927.

For the week in discussion, the rise in rig count can be attributed to higher offshore and inland waters operations. The number of offshore rigs totaled 20, marginally higher than 19. Three rigs operated in the inland waters last week, higher than two for the week ended Jun 1. The tally for onshore rigs was 1039, in line with prior week.

Oil Rig Count: Oil rig count was 862, up from 861 for the week ended Jun 1. Moreover, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly higher than last year’s 741. The oil rig count rose 11 times in the last 14 weeks.

Natural Gas Rig Count: The natural gas rig count of 198 is higher than 197 for the week ended Jun 1.

Moreover, like oil, the count of rigs exploring gas is above the year-ago tally of 185. Per the recent report, the number of natural gas-directed rigs is 88%, below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs of 61 units decreased from 66 units. However, the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) increased by seven units to 1,001 units.

Gulf of Mexico (GoM): The GoM rig count is at 19 units — 16 rigs were oil-directed — higher than the tally of 18 for the week ended Jun 1.

Conclusion

The number of total rigs exploring in the United States has increased, courtesy of the addition of three oil rigs in the Permian Basin. In the past six weeks, the number of oil rigs in the Permian Basin increased five times. 

West Texas Intermediate (WTI) crude continues to hover around $65-a-barrel psychological mark. This seems favorable for drillers in few U.S. shale plays like Eagle Ford despite the fact that producers are facing labor shortage and low pipeline capacity, especially in the Permian.

Two energy stocks that should make valuable additions to your portfolio are Anadarko Petroleum Corporation APC and WildHorse Resource Development Corporation WRD. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

We expect Anadarko Petroleum to witness year-over-year earnings growth of 229.6% in 2018.

WildHorse will likely see year-over-year earnings growth of 309.3% in 2018.

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Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Diamond Offshore Drilling, Inc. (DO) : Free Stock Analysis Report
 
Anadarko Petroleum Corporation (APC) : Free Stock Analysis Report
 
Baker Hughes Incorporated (BHGE) : Free Stock Analysis Report
 
Wildhorse Resource Development Corporation (WRD) : Free Stock Analysis Report
 
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