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Permian Oil Drilling Rig Count Increases in 7 of Past 10 Weeks

Zacks Equity Research
·4 min read

In its weekly release, Baker Hughes Company BKR reported an increase in U.S. rig count as compared with the prior week. The rotary rig count, issued by Baker Hughes, usually gets published in major newspapers and trade publications.

Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers to gauge the overall business environment of the oil and gas industry. The number of active rigs compared with the prior-week figure indicates the demand trajectory for Baker Hughes’ oilfield services from exploration and production companies.

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 604 for the week through Jan 21, higher thanthe prior-week count of 601. Thus, the tally has increased in three straight weeks. The current national rig count is also higher than the year-ago level of 378.

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The number of onshore rigs for the week ended Jan 21 totaled 584, higher than the prior-week count of 581. In offshore resources, 18 rigs were operating, in line with the prior-week count.

US Oil Rig Count Declines: Oil rig count was 491 for the week ended Jan 21, lower than the prior-week figure of 492. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — has, however, increased from the year-ago figure of 289.

Natural Gas Rig Count Rises in US: Natural gas rig count of 113 was higher than the prior-week figure of 109. The count of rigs exploring the commodity is higher than the prior-year week’s tally of 88. Per the latest report, the number of natural gas-directed rigs is 93% lower than the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 23 units, lower than the prior-week count of 25. 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 581, however, compared favorably with the prior-week level of 576.

Gulf of Mexico (GoM) Rig Count Flat: GoM rig count was 18 units, all being oil-directed. The count was flat with the prior-week number.

Rig Count in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 292, lower than the prior-week count of 293. The basin's oil drilling rig count increased in seven of the prior 10 weeks.

Outlook

The West Texas Intermediate crude price has improved massively in the past year. With coronavirus vaccines being rolled out on a massive scale and announcements that booster doses and antiviral pills are effective against Omicron, the economy will possibly overcome the recent spike in coronavirus cases. This is brightening up the fuel demand outlook and hence will pave the way for rig additions despite a slowdown in drilling activities as upstream players mainly focus on stockholder returns rather than boosting output.

Meanwhile, investors may keep a close eye on energy stocks like Whiting Petroleum Corporation WLL and Continental Resources, Inc. CLR. The companies are expected to benefit from the current healthy oil price scenario.

Whiting Petroleum is a leading upstream energy company and the top producer of crude oil in North Dakota. With oil prices improving at a healthy pace, Whiting Petroleum is expected to continue generating handsome cash flows while maintaining a healthy balance sheet.

Headquartered in Denver, CO, Whiting Petroleum has guided higher its 2021 total oil equivalent daily production, thereby securing higher cashflows.

Continental Resources is also a leading upstream energy company with proven reserves in North Dakota and Oklahoma. The oil inventories of Continental Resources are among the best in the industry.

Headquartered in Oklahoma City, Continental Resources has lower debt exposure as compared to composite stocks belonging to the industry.


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