Permian Oil Explorers Add Rigs in 5 of the Past 6 Weeks

In its weekly release, Baker Hughes Company 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 HAL, Schlumberger Limited SLB and Transocean Ltd. 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 461 for the week through Jun 11compared with the prior-week figure of 456. Thus, the tally increased in six of the past seven weeks since oil price recovered to the highest mark since 2018. It is also to be noted that the tally has reached the highest mark since Apr 2020. Notably, the current national rig count is also higher than the year-ago level of 279.

The number of onshore rigs for the week ended Jun 11 totaled 447, higher than the prior-week count of 442. Notably, in offshore resources, 13 rigs were operating, in line with the prior-week count.

US Oil Rig Count Increases: Oil rig count was 365 for the week ended Jun 11, higher than the prior-week count of 359. 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 199.

Natural Gas Rig Count Decreases in US: Natural gas rig count of 96 fell from the prior-week count of 97. But, the count of rigs exploring the commodity was higher than the prior-year week’s 78. 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 17 units, higher than the prior-week count of 16. 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 444 compared favorably with the prior-week level of 440.

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

Rig Count in Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 236, higher than the prior-week count of 232. Importantly, the tally for oil drilling rigs in the basin increased in five of the prior six weeks.

Outlook

The price of West Texas Intermediate crude, trading at more than $71 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 focusing mainly 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 Corporation WLL and Earthstone Energy, Inc. ESTE. While Whiting Petroleum sports a Zacks Rank #1 (Strong Buy), Earthstone 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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