In its weekly release, Baker Hughes Company (NYSE:BKR) BKR reported an increase in the U.S. rig count.
More on the Rig Count
Baker Hughes’ data, which is being 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 (NYSE:HAL) HAL, Schlumberger (NYSE:SLB) Limited SLB and Transocean Ltd (NYSE:RIG). RIG.
Details
Total U.S. Rig Count Increases: The count of rigs engaged in exploration and production of oil and natural gas in the United States was 373 for the week through Jan 15 versus the prior-week count of 360. Thus, the tally has increased for eight successive weeks, indicating that oil and gas drillers are gradually returning to domestic shale plays since the commodity pricing scenario is getting considerably better. However, the current national rig count is below the year-ago level of 796.
The number of onshore rigs for the week ending Jan 15 totaled 354 compared with the prior-week count of 341. Notably, the count of rigs operating in inland waters was three, higher than the prior-week tally of two. However, in offshore resources, 16 rigs were operating, lower than the prior-week count of 17.
US Adds 12 Oil Rigs: The oil rig count was 287 for the week through Jan 15 compared with 275 in the week ended Jan 8. Investors should also note that the current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is, however, below the year-ago 673.
Natural Gas Rig Count Rises in US: Natural gas rig count of 85 is higher than the prior-week count of 84. However, the count of rigs exploring the commodity was below the prior-year week’s 120. Per the latest report, the number of natural gas-directed rigs is almost 95% below the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 19 units, higher than the prior-week count of 18. Moreover, 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 354 compared favorably with the prior-week level of 342.
Gulf of Mexico (GoM) Rig Count Declines: The GoM rig count was 16 units, of which all were oil-directed. The count was lower than the prior-week tally of 17.
Rig Count in Prolific Basins
Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 189, higher than the prior-week count of 179. Thus, the count of oil drilling rigs has increased for three consecutive weeks in the Permian basin. In the Eagle Ford, the weekly tally for oil drilling rigs has increased to 27 from the prior-week count of 25.
Outlook
The price of West Texas Intermediate crude, which is trading above $52 per barrel, has improved significantly since April 2020, when oil was in the negative territory. The momentum is likely to continue since the coronavirus vaccine rollout will possibly help the economy recover strongly this year, aiding fuel demand. Thus, oil and gas drillers are likely to continue adding rigs to shale plays since the pricing environment is gradually getting healthier.
Meanwhile, investors may keep an eye on two energy stocks that are expected to benefit if the oil price rally sustains -- Devon Energy Corporation (NYSE:DVN) DVN and Diamondback (NASDAQ:FANG) Energy Inc. FANG. While Devon Energy carries a Zacks Rank #3 (Hold), Diamondback sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Transocean Ltd. (RIG): Free Stock Analysis Report
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