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Permian Basin Adds Oil Rig for the First Time in 7 Weeks

Zacks Equity Research

In its weekly release, Baker Hughes, a GE company BHGE reported an increase in weekly rig count 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 services 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 984 in the week ended May 31, up from the prior-week tally of 983. With this, the tally increased for the first time after declining for seven weeks in a row. The current national rig count is, however, lower than the prior year’s 1060.   

The number of offshore rigs, through the week ended May 31, totaled 23, higher than the previous week’s count of 22. Moreover, four rigs operated in inland waters and 957 rigs worked in the onshore plays. The count of both inland and onshore rigs was in line with the prior-week tally.  

US Adds 3 Oil Rigs: Oil rig tally was 800, up from 797 in the week ended May 24. Notably, the tally for oil drilling rigs increased for the first time after falling for three successive weeks.

Notably, the current total, far from the peak of 1,609 attained in October 2014, is however lower than 861 a year ago.

Natural Gas Rig Count Decreases in US: The natural gas rig count of 184 is lower than the count of 186 for the week ended May 24.

Moreover, the count of rigs exploring the commodity is lower than the prior-year weeks’ tally of 197. Per the latest report, the number of natural gas-directed rigs is 88.5% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 52 units against the previous week’s 51. Notably, 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 932 was in line with the prior-week tally.

Gulf of Mexico (GoM) Rig Count Up: The GoM rig count is 23 units, of which 20 were oil-directed. The count was higher than the prior-week tally of 22.

Conclusion

One oil drilling rig was added in the Permian basin. This primarily led to an increase in total rig count operating in the United States. Notably, Permian — the most prolific basin in the United States which employs roughly half of the nation’s total rigs — has seen an increase in oil drilling rigs after declining for six consecutive weeks.  

Although the rig count increased through the week till May 31, the tally may fall in the coming weeks owing to declining capital spending by U.S. explorers and a drop in oil prices.

Despite this bearish landscape, it would be wise for investors to consider Permian drillers as they have become more efficient with the deployment of lesser rigs to produce more of crude volumes. Two Permian drillers that investors may consider are Devon Energy Corporation DVN and Pioneer Natural Resources Company PXD. While Devon 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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Halliburton Company (HAL) : 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
 
Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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