Since Last Year, It’s Been Nothing But “Drill, Baby, Drill”

by David Fessler, Investment U Senior Analyst
Thursday, June 23, 2011

When Michael Steele first coined the phrase “drill, baby, drill” during a speech at the 2008 Republican National Convention, he suggested the United States needed to increase drilling for oil and gas and to become more energy independent.

No kidding…

But since then – believe it or not – “drill, baby, drill” is exactly what’s been happening…

How Much Drilling is More Drilling?

Domestic production is currently at its highest level since 2003. In spite of a massive spill in the Gulf of Mexico, and an administration largely opposed to increased drilling and fossil fuels in general.

If you need proof, look at the Baker Hughes Inc. (NYSE: BHI) weekly rotary rig counts. The oilfield services company keeps track of all rigs operating in the United States and updates that count every week. (You can download the free app for your iPhone or iPad, if you have one.)

According to Hughes’ numbers:

This time last year there were 1,539 drill rigs operating in the United States. That number includes both land and water-based rigs.

This week, that number is 1,860.

That’s nearly a 21 percent increase over last year.

Where’s All The Increase Coming From?

Last year it was gas shale plays. Then the price for natural gas cratered.

As evidence, the number of rigs currently drilling for natural gas in the United States is down.

The number currently stands at just 864 rigs.

That compares to 953 at this time last year, a decrease of 10 percent.

Global tensions being what they are, the price of oil has remained relatively high… and it looks to be headed higher – Greece debt-worries notwithstanding.

That’s shifted the focus away from natural gas and towards drilling for crude. Like natural gas, much of America’s crude is locked up in tight shale formations.

Oil Drilling in U.S. Steadily Increases

Hughes reports the number of rigs drilling for oil in the United States increased by 10 to 984 in just the last week, and by 410 in the last year.

That’s a whopping 71 percent increase in the number of rigs drilling for oil.

That makes oil and gas services companies like Baker Hughes, Schlumberger Limited (NYSE: SLB) and Halliburton Company (NYSE: HAL) worth a look.

All three saw significant gains this year, but all are well off their highs reached in early June. Demand for oil is as strong as ever, and so is the push for energy independence.

That will keep existing drills turning, new ones being brought online weekly and companies like the three mentioned above with lots of business.

Good investing,

David Fessler