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, which is being 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 affects 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 U.S. Rig Count Increases: The count of rigs engaged in exploration and production of oil and natural gas in the United States was 392 for the week through Feb 5 versus the prior-week count of 384. Thus, the tally has increased for 11 successive weeks, indicating that oil and gas drillers are gradually returning to domestic shale plays since the commodity pricing scenario is improving. Importantly, the 11 weeks of rising rig tally is the longest since June 2017. However, the current national rig count is below the year-ago level of 790.
The number of onshore rigs for the week ending Feb 5 totaled 375 compared with the prior-week count of 365. Notably, the count of rigs operating in inland waters was one, lower than the prior-week tally of three. However, in offshore resources, 16 rigs were operating, flat with the prior-week count.
US Adds 4 Oil Rigs: The oil rig count was 299 for the week through Feb 5 compared with 295 in the week ended Jan 29. Investors should also note that the current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is, however, below the year-ago 676.
Natural Gas Rig Count Rises in US: Natural gas rig count of 92 was higher than the prior-week count of 88. However, the count of rigs exploring the commodity was below the prior-year week’s 111. Per the latest report, the number of natural gas-directed rigs is almost 94.3% 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 22. However, 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 372 compared favorably with the prior-week level of 362.
Gulf of Mexico (GoM) Rig Count In Line: The GoM rig count was 16 units, of which all were oil-directed. The count was in line with the prior-week tally.
Rig Count in Prolific Basins
Permian recorded a weekly oil rig tally of 198 versus the prior-week count of 192. Thus, the tally in the most prolific resource in the United States increased for two weeks in a row. In the Haynesville play, the weekly tally for gas drilling rigs has risen to 46 from the prior-week count of 44.
Outlook
The price of West Texas Intermediate crude, which is trading above $55 per barrel, has improved significantly since April 2020, when oil was in the negative territory. The momentum is likely to continue since the coronavirus vaccine rollout will possibly help the economy recover strongly this year, aiding fuel demand. Thus, oil and gas drillers are likely to continue adding rigs to shale plays since the pricing environment is improving rapidly.
Meanwhile, investors may keep an eye on two energy stocks that are expected to benefit if the oil price rally sustains -- Devon Energy Corporation DVN and Diamondback Energy Inc. FANG. While Devon Energy sports a Zacks Rank #1 (Strong Buy), Diamondback has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rankstocks here.
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