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Permian Oil Drilling Rig Count Up in 4 of 10 Weeks

In its weekly release, Baker Hughes Company BKR stated that the U.S. rig count was lower than the prior-week tally. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.

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. The number of active rigs and its comparison with the prior-week figure indicates the demand trajectory for Baker Hughes’ oilfield services from exploration and production companies.

Details

Total U.S. Rig Count Falls: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 759 for the week ended Feb 3. The figure is lower than the prior week’s count of 771. Thus, since June 2020, the upstream energy players have cut the count of oil and gas rigs by the most. The current national rig count is, however, higher than the year-ago level of 613.

The onshore rigs in the week ended Feb 3 totaled 745, lower than the prior week's count of 756. In offshore resources, 12 rigs were operating, lower than the prior week’s count of 13.

U.S. Oil Rig Count Falls: The oil rig count was 599 in the week ended Feb 3, lower than the prior-week figure of 609. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is, however, up from the year-ago figure of 497.

U.S. Natural Gas Rig Count Decreases: Natural gas rig count of 158 is lower than the prior-week figure of 160. The count of rigs exploring the commodity is, however, higher than the prior-year week’s tally of 116. Per the latest report, the number of natural gas-directed rigs is 90.2% lower than the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 21 units, in line with the prior-week count. 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) of 738 is lower than the prior-week level of 750.

Gulf of Mexico (GoM) Rig Count Falls: GoM rig count was 12 units, all oil-directed. The count was lower than the prior-week number of 13.

Rig Count in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil rig tally of 345, lower than the prior week's count of 350. The tally increased in four of the prior 10 weeks.

Outlook

The West Texas Intermediate crude price is trading at more than the $70-per-barrel mark, which is still highly favorable for exploration and production activities. Solid oil prices will likely pave the way for rig additions despite a slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output.

Investors may keep a close eye on energy stocks like EOG Resources EOG and Devon Energy Corporation DVN, as these companies are expected to benefit from the current healthy oil price scenario.

EOG Resources, currently carrying a Zacks Rank #3 (Hold), is a leading oil and natural gas exploration and production company. It is well-placed to capitalize on the promising business scenario. It has an estimated 11,500 net undrilled premium locations, resulting in a brightened production outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EOG Resources is strongly committed to returning capital to shareholders. Since it transitioned to premium drilling, the company has returned $10.4 billion in cash to stockholders. With the employment of premium drilling, EOG can reduce its cash operating costs per barrel of oil equivalent, thereby aiding its bottom line.

Devon Energy is a well-known upstream energy firm with a strong multi-basin portfolio. Delaware basin is among the basins that contribute significant oil equivalent production to DVN.

The Zacks Rank #3 firm, Devon Energy, has a prolific multi-decade inventory, suggesting a solid production outlook.

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