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US Rig Count Falls: Should Investors Still Watch FANG & MTDR Stocks?
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In its weekly release, Baker Hughes Company (BKR - Free Report) stated that the U.S. rig count was lower 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.
Amid a declining weekly rig count, should investors keep an eye on leading oil and gas exploration companies like Diamondback Energy (FANG - Free Report) and Matador Resources (MTDR - Free Report) ? 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 Falls: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 582 in the week ended Sept. 6, lower than theweek-ago count of 583. Moreover, the current national rig count declined from the year-ago level of 632, 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 Sept. 6 totaled 562, lower than the prior week's count of 563. In offshore resources, 19 rigs were operating, in line with the week-ago count.
U.S. Oil Rig Count Flat: The oil rig count was 483 in the week ending Sept. 6, which is in line with the week-ago figure. 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 513.
U.S. Natural Gas Rig Count Declines: The natural gas rig count of 94 was lower than the week-ago figure of 95. The count of rigs exploring the commodity was also below the year-ago week’s tally of 113. Per the latest report, the number of natural gas-directed rigs is 94.1% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 14 units, in line with the week-ago 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 568 was down from the prior-week level of 569.
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 306, which was higher than the week-ago figure of 305. The count was, however, below the prior-year level of 320.
Handsome Oil Prices Offer Cushion: FANG, MTDR to Watch
The West Texas Intermediate (WTI) crude price is trading close to $70 per barrel, which remains favorable for exploration and production activities. Despite a slowdown in drilling due to upstream companies focusing on stockholder returns over increasing output, the handsome oil pricing environment benefits upstream energy companies. This is because the breakeven WTI price for U.S. oil and gas producers is significantly lower for existing wells across all shale plays in the United States, as shown in the image below. Additionally, for most new wells, the average breakeven WTI price remains below the current market price.
Breakeven WTI Price for U.S. Producers
Image Source: Statista
Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks like Diamondback Energy and Matador Resources.
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 (Hold), 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 pending Endeavor merger, likely to be completed in the third or fourth quarter of this year, will increase its Permian footprint, which the company cited at a combined pro forma scale of approximately 838,000 net acres. With the merger, FANG will have more inventory of core drilling locations with a breakeven oil price of less than $40 per barrel.
Matador Resources recently entered into a $1.91 billion agreement to expand its footprint in the prolific Delaware Basin. With the deal expected to close in the late third quarter of 2024, the #3 Ranked company is projected to have more than 190,000 net acres in the Delaware Basin on a pro forma basis. Consequently, the company estimates that its production will exceed 180,000 barrels of oil equivalent per day, positioning it for significant growth and enhanced operational scale.
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US Rig Count Falls: Should Investors Still Watch FANG & MTDR Stocks?
In its weekly release, Baker Hughes Company (BKR - Free Report) stated that the U.S. rig count was lower 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.
Amid a declining weekly rig count, should investors keep an eye on leading oil and gas exploration companies like Diamondback Energy (FANG - Free Report) and Matador Resources (MTDR - Free Report) ? 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 Falls: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 582 in the week ended Sept. 6, lower than theweek-ago count of 583. Moreover, the current national rig count declined from the year-ago level of 632, 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 Sept. 6 totaled 562, lower than the prior week's count of 563. In offshore resources, 19 rigs were operating, in line with the week-ago count.
U.S. Oil Rig Count Flat: The oil rig count was 483 in the week ending Sept. 6, which is in line with the week-ago figure. 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 513.
U.S. Natural Gas Rig Count Declines: The natural gas rig count of 94 was lower than the week-ago figure of 95. The count of rigs exploring the commodity was also below the year-ago week’s tally of 113. Per the latest report, the number of natural gas-directed rigs is 94.1% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 14 units, in line with the week-ago 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 568 was down from the prior-week level of 569.
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 306, which was higher than the week-ago figure of 305. The count was, however, below the prior-year level of 320.
Handsome Oil Prices Offer Cushion: FANG, MTDR to Watch
The West Texas Intermediate (WTI) crude price is trading close to $70 per barrel, which remains favorable for exploration and production activities. Despite a slowdown in drilling due to upstream companies focusing on stockholder returns over increasing output, the handsome oil pricing environment benefits upstream energy companies. This is because the breakeven WTI price for U.S. oil and gas producers is significantly lower for existing wells across all shale plays in the United States, as shown in the image below. Additionally, for most new wells, the average breakeven WTI price remains below the current market price.
Breakeven WTI Price for U.S. Producers
Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks like Diamondback Energy and Matador Resources.
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 (Hold), 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 pending Endeavor merger, likely to be completed in the third or fourth quarter of this year, will increase its Permian footprint, which the company cited at a combined pro forma scale of approximately 838,000 net acres. With the merger, FANG will have more inventory of core drilling locations with a breakeven oil price of less than $40 per barrel.
Matador Resources recently entered into a $1.91 billion agreement to expand its footprint in the prolific Delaware Basin. With the deal expected to close in the late third quarter of 2024, the #3 Ranked company is projected to have more than 190,000 net acres in the Delaware Basin on a pro forma basis. Consequently, the company estimates that its production will exceed 180,000 barrels of oil equivalent per day, positioning it for significant growth and enhanced operational scale.