Permian Oil Rig Count Increases in 3 of Prior 5 Weeks
In its weekly release, Baker Hughes Company BKR stated that the U.S. rig count was higher than the prior week’s figure. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.
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. The number of active rigs and its comparison with the week-ago figure indicates the demand trajectory for the company’s oilfield services from exploration and production companies.
Rig Count Data in Detail
Total U.S. Rig Count Rises: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 629 in the week ended Mar 15. The figure is higher than theweek-ago count of 622. Although the figure increased in three of the prior five weeks, there has been a slowdown in drilling activities. Many analysts believe that shale producers are getting more efficient, requiring fewer rigs, while some doubt whether certain producers have enough prospective land to drill. The current national rig count is, however, lower than the year-ago level of 754.
Onshore rigs in the week that ended on Mar 15 totaled 605, increasing from the prior week's count of 601. In offshore resources, 24 rigs were operating, higher than the week-ago count of 21.
U.S. Oil Rig Count Rises: The oil rig count was 510 in the week ended Mar 15, increasing from the week-ago figure of 504. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is, however, down from the year-ago figure of 589.
U.S. Natural Gas Rig Count Rises: The natural gas rig count of 116 was higher than the week-ago figure of 115. The count of rigs exploring the commodity was, however, below the year-ago week’s 162. Per the latest report, the number of natural gas-directed rigs is almost 93% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 13 units, in line with the week-ago count. 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 616 increased from the prior-week level of 609.
Rig Count in the Most Prolific Basin
Permian — the most prolific basin in the United States — recorded a weekly oil rig count of 310, higher than the week-ago figure of 307. The number increased in three of the prior five weeks.
Outlook
The West Texas Intermediate crude price is trading at more than the $80-per-barrel mark. Although the commodity pricing scenario is favorable for exploration and production operations, there has been a slowdown in drilling activities, which may continue as upstream players are prioritizing stockholder returns rather than boosting output.
Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks such as Diamondback Energy, Inc. FANG and Matador Resources Company MTDR.
Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. The exploration and production company is likely to continue witnessing increased production volumes. FANG, carrying a Zacks Rank #3 (Hold), also has an investment-grade balance sheet. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Matador Resources has a strong presence in the oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Promising oil prices are likely to aid it in increasing production volumes. Matador acquired Advance Energy Partners Holdings, LLC, which comprises several oil and natural gas-producing properties and undeveloped acreage. Zacks #3 Ranked MTDR expects the buyout to be accretive to important valuation and financial metrics.
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