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Permian Basin Witnesses Addition of 5 Oil Drilling Rigs


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In its weekly release,  Baker Hughes, a GE company  (BHGE) reported an increase in 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 services players' rotary rig count impacts demand for energy services like drilling, completion and production provided by the likes of Halliburton Company HAL , Schlumberger Limited SLB , Diamond Offshore Drilling, Inc. DO and Transocean Ltd. RIG .

Details

Total U.S. Rig Count Increases:   Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 1081 in the week ended Nov 9, higher than 1067 in the prior week. Notably, the rig count increased in six of the last 10 weeks.

Despite the rig count slipping to an all-time low of 404 in May 2016, it has been rising rapidly in U.S. shale resources. The current national rig count is considerably higher than the prior-year level of 907.  

For the week under review, the rise in rig count can be attributed to increased onshore and offshore operations. The number of onshore rigs totaled 1057, up from 1046. Moreover, offshore rig count jumped to 21 from 18. The tally for inland water rig was in line with the count for the week ended Nov 2. Notably, three rigs operated in the inland waters last week.

U.S. Adds 12 Oil Rigs:  Oil rig tally was 886, up from 874 in the week ended Nov 2. Importantly, the addition of 12 oil rigs marks the highest since the nation included 15 oil rigs for the week ended May 25. 

Moreover, the current total, though far from the peak of 1,609 attained in October 2014, is significantly higher than last year's 738. 

Natural Gas Rig Tally Increases in U.S.:  The natural gas rig count of 195 was higher than 193 for the week ended Nov 2.

Moreover, like oil, the count of rigs exploring the commodity is above the prior-year number of 169. However, per the recent report, the number of natural gas-directed rigs is 87.9%, below the all-time high of 1,606 in 2008.    

Rig Count by Type:  The number of vertical drilling rigs totaled 72 units, up from the previous week's 65. Moreover, the 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) increased by seven units to 1009.  

Gulf of Mexico (GoM) Rig Count In line:  The GoM rig count is 21 units, of which, 16 were oil-directed. The count is higher than the tally of 18 for the week ended Nov 2. 

Conclusion

The number of rigs exploring Permian basin increases despite pipeline bottleneck. Permian added five oil rigs, while two oil rigs were included in the DJ-Niobrara basin. Marcellus witnessed the addition of two natural gas rigs.

Although West Texas Intermediate (WTI) crude price fell almost 20% since early October, the announcement by Saudi Arabia to curb supply for the month of December will likely give some respite to the commodity price. The positive development is expected to back oil drillers in adding more rigs, reflecting favorable business scenario for explorers and producers. Hence, investor-friendly stocks like Energen Corporation EGN and Northern Oil and Gas, Inc.  NOG are in focus. While Energen sports a Zacks Rank #1 (Strong Buy), Northern Oil carries a Zacks Rank #2 (Buy). You can see  the complete list of today's Zacks #1 Rank stocks here .

Energen surpassed the Zacks Consensus Estimate in each of the last four quarters, the average positive earnings surprise being 18.6%.  

We expect Northern Oil's earnings to skyrocket 292.9% year over year in 2018.

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Energen Corporation (EGN): Free Stock Analysis Report

Halliburton Company (HAL): Free Stock Analysis Report

Schlumberger Limited (SLB): Free Stock Analysis Report

Diamond Offshore Drilling, Inc. (DO): Free Stock Analysis Report

Transocean Ltd. (RIG): Free Stock Analysis Report

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: HAL , SLB , DO , RIG



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