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Permian Basin Drillers Add Crude Oil Rigs in 18 of 20 Weeks

In its weekly release, Baker Hughes Company (BKR) reports that the U.S. rig count is higher than the prior week.

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This story originally appeared on Zacks

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

- Zacks

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 and its comparison with the prior-week figure indicate the trajectory of demand for Baker Hughes’ oilfield services from exploration and production companies.

Details

Total US Rig Count Rises: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 586 for the week through Dec 23, higher thanthe prior-week count of 579. Thus, the tally has increased for three straight weeks, registering the highest mark since April 2020. The current national rig count is higher than the year-ago level of 348.

The number of onshore rigs for the week ended Dec 23 totaled 570, higher than the prior-week count of 563. In offshore resources, 15 rigs were operating, in line with the prior-week count.

US Oil Rig Count Rises: Oil rig count was 480 for the week ended Dec 23, higher than the prior-week figure of 475. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is higher than the year-ago figure of 264.

Natural Gas Rig Count Increases in US: Natural gas rig count of 106 was higher than the prior-week figure of 104. The count of rigs exploring the commodity also increased from the prior-year week’s 83. Per the latest report, the number of natural gas-directed rigs is 93.4% lower than the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 27 units, higher than the prior-week count of 26. 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 559 compared favorably with the prior-week level of 553.

Gulf of Mexico (GoM) Rig Count Flat: GoM rig count was 15 units, with all being oil-directed. The count was in line 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 294, higher than the prior-week count of 288. The basin's oil drilling rigs increased in 18 of the last 20 weeks.

Outlook

The West Texas Intermediate crude price is trading above $72 per barrel, significantly higher than the pandemic-hit April last year, when oil was in the negative territory. With coronavirus vaccines being rolled out on a massive scale and the announcements that booster doses and antiviral pills are effective against Omicron, the demand for fuel will possibly improve further. This has paved the way for further rig additions despite a slowdown of 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. Both the companies are expected to benefit if the oil price remains healthy.

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 witnessed upward earnings estimate revisions for 2021 in the past 30 days. Looking at the price chart, WLL has gained 156% year to date, outpacing the 98.1% improvement of the composite stocks belonging to the industry. WLL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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 witnessed upward earnings estimate revisions for 2021 in the past 30 days. Considering the price chart, #3 Ranked Continental Resources has gained 175.7% so far this year, outpacing the 98.1% improvement of the composite stocks belonging to the industry.



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