Permian Oil Rig Tally Rises After Falling for 2 Weeks Straight

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, help 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 the 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 448 for the week through May 7compared with the prior-week figure of 440. The latest tally marked the highest count since April 2020. Moreover, the count has increased for two consecutive weeks. Notably, the current national rig count is above the year-ago level of 374.

The number of onshore rigs for the week ended May 7 totaled 434, higher than the prior count of 426. In offshore resources, 13 rigs were operating in line with the prior-week count.

US Adds 2 Oil Rigs: Oil rig count was 344 for the week ended May 7 compared with 342 in the week ended Apr 30. Investors should also note that the current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is also higher than the year-ago figure of 292.

Natural Gas Rig Count Increases in US: Natural gas rig count of 103 increased from the prior-week count of 96. Notably, the count of rigs exploring the commodity was higher than the prior-year week’s 80. Per the latest report, the number of natural gas-directed rigs is almost 93.6% below the all-time high of 1,606 recorded in 2008. Importantly, the number of rigs added by the drillers in a week is the highest since December 2018.

Rig Count by Type: The number of vertical drilling rigs totaled 17 units versus the prior-week count of 19. But, 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 431 compared favorably with the prior-week level of 421.

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 227 versus the prior-week count of 222. Thus, the tally for oil drilling rigs in the basin increased after falling for two consecutive weeks. In the Haynesville basin, the tally for gas drilling rigs increased to 48 from the prior-week count of 44.

Outlook

The price of West Texas Intermediate crude, trading at more than $65 per barrel mark, has improved drastically from the pandemic-led hit in 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 will likely pave the way for further crude price recovery, thereby encouraging oil and gas drillers to continue adding rigs to shale plays.

Meanwhile, investors may keep an eye on two energy stocks that are expected to benefit if the oil price continues to remain healthy — Devon Energy Corporation DVN and Matador Resources (NYSE:MTDR) Company MTDR. While Matador sports a Zacks Rank #1 (Strong Buy), Devon Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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