Permian Oil Explorers Add Rigs in 6 of the Past 7 Weeks

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, 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 impacts 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 US Rig Count Increases: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 470 for the week through Jun 18compared with the prior-week figure of 461. Thus, the tally increased for two straight weeks with oil price rallying to the highest mark since 2018. It is also to be noted that the tally has reached the highest since April 2020. Notably, the current national rig count is also higher than the year-ago level of 266.

The number of onshore rigs for the week ended Jun 18 totaled 456, higher than the prior-week count of 447. Notably, in offshore resources, 13 rigs were operating, in line with the prior-week count.

US Oil Rig Count Increases: Oil rig count was 373 for the week ended Jun 18, higher than the prior-week count of 365. Notably, the tally turned out to be the highest since April 2020. Investors should also note that the current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is higher than the year-ago figure of 189.

Natural Gas Rig Count Increases in US: Natural gas rig count of 97 increased from the prior-week count of 96. Thus, in the past six weeks, the tally has increased for the first time. Moreover, the count of rigs exploring the commodity was higher than the prior-year week’s 75. Per the latest report, the number of natural gas-directed rigs is almost 94% below the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 20 units versus the prior-week count of 17. Notably, 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 450 compared favorably with the prior-week level of 444.

Gulf of Mexico (GoM) Rig Count Flat: GoM rig count was 13 units, of which all were oil-directed. The count was in line with the prior-week tally.

Rig Count in Prolific Basins

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 237, higher than the prior-week count of 236. Importantly, the tally for oil drilling rigs in the basin increased in six of the prior seven weeks. Moreover, in DJ-Niobrara, the tally for oil drilling rigs increased to nine from the prior-week count of six.

Outlook

The price of West Texas Intermediate crude, trading at more than $73 per barrel mark, has improved drastically from the pandemic-hit April last year, when oil was in the negative territory. With coronavirus vaccines being rolled out at a massive scale, the demand for fuel will possibly improve further. This has paved the way for further rig additions, although drilling activities have slowed down as upstream players are mainly focusing on stockholder returns rather than boosting output.

Meanwhile, investors may keep an eye on two energy stocks that are expected to benefit if oil price continues to stay healthy — Whiting Petroleum (NYSE:WLL) Corporation WLL and Earthstone Energy, Inc. ESTE. While Whiting Petroleum sports a Zacks Rank #1 (Strong Buy), Earthstone Energy (NYSE:ESTE) carries a Zacks Rank #2 (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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