US Rig Count Rises: Time to Keep an Eye on DVN & FANG Stocks?

In its last weekly release, Baker Hughes Company BKR stated that the U.S. rig count was higher than the prior week’s figure. 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 week-ago figure indicates the demand trajectory for the company’s oilfield services from exploration and production companies.

With the weekly rig count rising, should investors keep an eye on leading oil and gas exploration companies like Devon Energy Corp DVN and Diamondback Energy FANG? Before diving into that, let's explore the latest rig count data details.

Baker Hughes’ Data: Rig Count in Detail

Total U.S. Rig Count Rises: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 586 in the week ended Oct. 11, higher than the week-ago count of 585. However, the current national rig count declined from the year-ago level of 622, reflecting the fact that there has been a slowdown in drilling activities. Some analysts see this downside as a sign of increased efficiency among shale producers, who may need fewer rigs. However, there are doubts among a few about whether certain producers have sufficient promising land for drilling.

Onshore rigs in the week that ended on Oct. 11 totaled 567, higher than the prior week's count of 566. In offshore resources, 18 rigs were operating, in line with the week-ago count.

U.S. Oil Rig Count Rises: The oil rig count was 481 in the week ending Oct. 11, higher than the week-ago figure of 479. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — was down from the year-ago figure of 501.

U.S. Natural Gas Rig Count Declines: The natural gas rig count of 101 declined from the week-ago figure of 102. Moreover, the count of rigs exploring the commodity was below the year-ago week’s tally of 117. Per the latest report, the number of natural gas-directed rigs is 94% lower than the all-time high of 1,606 recorded in 2008. 

Rig Count by Type: The number of vertical drilling rigs totaled 12 units, which declined from the week-ago count of 14. 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 574 was, however, higher than the prior-week level of 571.

Rig Tally in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil and gas rig count of 304, flat with the week-ago figure. The count was, however, below the prior-year level of 311.

Handsome Oil Prices to Remain Favorable: DVN, FANG to Gain

West Texas Intermediate (WTI) crude is currently hovering around $70 per barrel, presenting a favorable landscape for exploration and production. Despite moderation in drilling activity as upstream companies prioritize stockholder returns over production growth, the strong pricing environment remains advantageous for energy producers. U.S. oil and gas companies benefit from significantly lower breakeven WTI prices across all shale plays, particularly for existing wells. Furthermore, the average breakeven price for most new wells remains below current market levels, positioning upstream players for continued profitability in the current environment.

Breakeven WTI Price for US Producers

Image Source: Statista

Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks like Devon Energy and Diamondback Energy.

In the United States, Devon Energy is one of the foremost explorers and producers of oil and gas, with its acres spanning across the prolific Delaware Basin. The upstream energy player recently completed a $5 billion acquisition of Grayson Mill Energy's Williston Basin business, which has helped the company increase its oil production and expand its inventory of key drilling locations. This expansion in the Williston Basin footprint will enable Devon Energy, with a Zacks Rank of 3 (Hold), to immediately enhance its key financial metrics.

Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company, carrying a Zacks Rank #3, is likely to continue witnessing increased production volumes. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The recent Endeavor merger has expanded FANG's presence in the Permian Basin, bringing its total pro forma footprint to about 838,000 net acres. As a result, the company now has a larger inventory of prime drilling locations, with a breakeven oil price below $40 per barrel.

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Devon Energy Corporation (DVN): Free Stock Analysis Report
 
Baker Hughes Company (BKR): Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG): Free Stock Analysis Report

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