Permian Basin Drilling Continues To Rise On Spike In Oil

In its weekly release, Houston-based oilfield services player Baker Hughes, a GE company, reported an increase in crude and natural gas rig counts in the United States.

About the Rig Count

Baker Hughes’ data, issued since 1944 at the end of every week, helps energy service providers gauge the overall business environment of the oil and gas industry.

Change in Baker Hughes’ rotary rig count dents demand for energy services like drilling, completion, production, etc., provided by the likes of Halliburton Company (NYSE:HAL) , Schlumberger Ltd. (NYSE:SLB) , Weatherford International plc (NYSE:WFT) , Diamond Offshore Drilling, Inc. (NYSE:DO) and Transocean Ltd. (NYSE:RIG) .

Details

Weekly Summary: Rigs engaged in the exploration and production of oil and natural gas in the United States totaled 929 in the week ended Dec 1 — higher than the prior week’s 923. This marked an increase for four consecutive weeks after the tally fell for five weeks in a row.

Since it slipped to an all-time low of 404 last May, rig count has been rising rapidly in U.S. shale resources. Punctuated by a few pauses, the current nationwide rig count is considerably higher than the prior-year level of 597.

For the week in discussion, the rise in rig count can be attributed to increased onshore operations. The count of rigs engaged in onshore works rose from 900 to 908. However, the tally for offshore activities fell to 20 from 22.

One rig operated in the inland waters last week. The count remains the same this week.

Oil Rig Count: Oil rig count of 749 was higher than 747 in the prior week. Also, the current tally, though far from the peak of 1,609 attained in October 2014, is significantly above the previous year’s count of 477.

Natural Gas Rig Count: The natural gas rig count — which plunged to its lowest levels last August — increased by four units to 180. Moreover, like oil, the count of rigs for gas exploration sits comfortably above the year-ago tally of 119.

As per the most recent report, the number of natural gas-directed rigs is almost 89% below the all-time high of 1,606 achieved in late summer 2008.

Rig Count by Type: The number of vertical drilling rigs of 66 units remained in line with the earlier week, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) increased by six units to 863.

Gulf of Mexico (GoM): The GoM rig count stands at 20 units — 16 of which were oil-directed — lower than the prior count of 22.

Conclusion

The number of rigs exploring oil in the United States has increased. The count of rigs searching for natural gas also surged. Naturally, the total oil and gas rig count has increased, primarily supported by the addition of four rigs in the Permian basin and three rigs in the Haynesville play.

A rise in total rig count, both from the year-ago and prior week figures, were primarily supported by rising oil and natural prices. Recently, crude and gas traded at $58.36 per barrel and $3.06 per million Btu, respectively, higher than last year’s average marks of $43.29 and $2.52 – per The U.S. Energy Information Administration (EIA). Investors should know, anticipation by majority of the analysts that the production cut deal between OPEC and non-OPEC crude producers will be extended for another nine months next year, supported the rally in crude price.

Recovering commodity prices are likely to prove beneficial for oil and gas exploration and production companies. Two oil stocks that should make valuable additions to your portfolio are Denbury Resources Inc. (NYSE:DNR) and Northern Oil and Gas, Inc. (NYSE:NOG) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Plano, TX, Denbury explores oil and gas resources in the Gulf Coast areas. The company posted an average positive earnings surprise of 125% for the last four quarters.

Based in Minnetonka, MN, Northern Oil and Gas is primarily engaged in exploration and development activities. We expect the company to see year-over-year revenue growth of 47.3% in 2017.

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Weatherford International PLC (WFT): Free Stock Analysis Report

Schlumberger N.V. (SLB): Free Stock Analysis Report

Halliburton Company (HAL): Free Stock Analysis Report

Transocean Ltd. (RIG): Free Stock Analysis Report

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

Denbury Resources Inc. (DNR): Free Stock Analysis Report

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

Baker Hughes Incorporated (NYSE:BHGE): Free Stock Analysis Report

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