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Permian Basin Adds Oil Drilling Rigs for 5 Straight Weeks

Zacks Equity Research
·4 min read

In its weekly release, Baker Hughes Company BKR reported a drop in the U.S. rig count.

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 and Transocean Ltd. RIG.

Details

Total US Rig Count Falls: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 310 in the week through Nov 20 versus the prior-week count of 312. Thus, the tally has declined for the first time in 10 weeks, even though oil price has improved significantly in the past few months. Notably, the current national rig count is also below the year-ago level’s 803.

The number of onshore rigs in the week ending Nov 20 totaled 296 compared with the prior-week count of 297. Moreover, in the offshore resources, 12 rigs were operating, versus the prior-week count of 13. Notably, the count of rigs operating in inland waters was two, same as the prior-week tally.

US Removes 5 Oil Rigs: Oil rig count was 231 in the week through Nov 20 compared with 236 in the week ended Nov 13. Investors should also note that the current tally of oil rigs, far from the peak of 1,609 attained in October 2014, is also below the year-ago 671.

Natural Gas Rig Count Increases in US: The natural gas rig count of 76 was higher than the prior-week count of 73. However, the count of rigs exploring the commodity is below the prior-year week’s 129. Importantly, per the latest report, the number of natural gas-directed rigs is 95.3% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 18 units, lower than the prior-week count of 22. However, 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 292 compares favorably with the prior-week level of 290.

Gulf of Mexico (GoM) Rig Count Declines: The GoM rig count is 12 units, of which all were oil-directed. The count was lower than the prior-week count of 13.

Rig Count in Prolific Basins

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 155, higher than the prior-week count of 153. Thus, the basin has been adding oil drilling rigs for five straight weeks. In the gas-rich Haynesville, the weekly tally for natural gas drilling rigs increased to 40 from the prior-week count of 37.

Outlook

Although the price of West Texas Intermediate (WTI) crude, approaching $45 per barrel, is significantly below the 2020-beginning price of more than $60, the commodity price has improved considerably over the past few months. The momentum is likely as positive vaccine results have raised hopes of higher fuel demand. 

Thus, oil and gas drillers are likely to restart adding rigs to shale plays since the pricing environment of the commodity is gradually improving.

Meanwhile, investors may keep an eye on two energy stocks which are expected to benefit if the oil price rally sustains – Devon Energy Corporation DVN and Diamondback Energy Inc. FANG. Both the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
 
Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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Zacks Investment Research