More Rigs Gather At Permian Basin As Oil & Gas Prices Recover

In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company (NYSE:BHGE) , reported an increase in natural gas rig count in the United States. The number of rigs exploring oil remained in line with the prior week.

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 915 in the week ended Nov 17 — higher than the prior week’s 907. This marked an increase in total rig count for two consecutive weeks after the tally fell for five weeks in a row.

Since it slipped to an all-time low of 404 last May, 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 588.

For the week in discussion, the rise in rig count can be attributed to increased onshore and offshore operations. The count of rigs engaged in offshore works rose from 18 to 21, while the tally for onshore activities jumped to 893 from 888.
The number of rigs for inland waters remains flat with the previous week.

Oil Rig Count: Oil rig count of 738 is in line with the prior week mark. Also, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 471.

Natural Gas Rig Count: The natural gas rig count – which plunged to its lowest last August – increased by eight units to 177. Like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 116.

As per the most recent report, the number of natural gas-directed rigs is almost 89% below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs increased by six units to 63, while 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 two units to 852.

Gulf of Mexico (GoM): The GoM rig count stands at 21 units — 17 of which were oil-directed — higher than the prior count of 18.

Details of the Weekly Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, helps energy service providers gauge the overall business environment of the oil and gas industry.

Change in Baker Hughes’ rotary rig count weighs heavily on demand for energy services like drilling, completion, production, etc., provided by companies like Halliburton Company (NYSE:HAL) , Schlumberger Ltd. (NYSE:SLB) , Weatherford International plc (NYSE:WFT) , Diamond Offshore Drilling, Inc. (NYSE:DO) and Transocean Ltd. (NYSE:RIG) .

Conclusion

The number of rigs exploring natural gas in the United States has increased, while the count for oil remains the same as last week. Overall total oil and gas rig count has increased, primarily supported by the addition of five rigs in the Permian basin. Haynesville shale play witnessed two more rigs for upstream operations.

A rise in total rig count, both from the year-ago and prior week figures, were primarily supported by recovering oil and natural prices. Recently, crude and gas traded at $56.09 per barrel and $3.05 per million Btu respectively, higher than last year’s average marks of $43.29 and $2.52 – per The U.S. Energy Information Administration (EIA).

Recovering commodity prices are likely to prove beneficial for oil and gas exploration and production companies. Two oil stocks that might make valuable additions to your portfolio now are Denbury Resources Inc. (NYSE:DNR) and Northern Oil and Gas, Inc. (NYSE:NOG) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Plano, TX, Denbury explores oil and gas resources in the Gulf Coast areas. The company posted an average positive earnings surprise of 125% for the last four quarters.

Based in Minnetonka, MN, Northern Oil and Gas is primarily engaged in exploration and development activities. We expect year-over-year revenues growth of 47.3% for the company in 2017.

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Weatherford International PLC (WFT): Free Stock Analysis Report

Schlumberger N.V. (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

Denbury Resources Inc. (DNR): Free Stock Analysis Report

Northern Oil and Gas, Inc. (NOG): Free Stock Analysis Report

Baker Hughes Incorporated (BHGE): Free Stock Analysis Report

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