US Rig Count Made Small Gains Last Week, but Will They Continue?
(Continued from Prior Part)
Permian Basin rig count
Currently, there are 674 working oil rigs in the United States. The Permian Basin accounts for 250 of these rigs—more than any other region. The Eagle Ford Shale has 78 active oil rigs, the Williston Basin has 73, and the Mississippian Lime has 20.
The Permian Basin oil rig count decreased by two in the week ended August 21. On average, two crude oil rigs were added in the four weeks ended August 21 in the Permian Basin. The basin added three rigs on average in the four weeks ended August 14.
In the 12 months ended August 21, 2015, the number of active oil rigs in the Permian Basin fell by 300, or 55%. The Permian Basin rig count is at its lowest level since July 2010. But rig counts in the basin seemed to have been in a turnaround recently.
What does this mean?
Over the past year, the steep fall in the Permian Basin’s rig count suggests that producers operating in this region had reduced their drilling activity. This reduction can slow these companies’ production growth or even reduce their production. The Permian basin oil rig count had increased for six consecutive weeks until the week ended August 7, hinting at a production increase here. However, If Permian rigs continue to decrease, as they did last week, Permian Basin production may continue dropping. To learn more about this, read Market Realist’s US Shale Production Falls in July, EIA Sees Lower Levels Ahead. RSP Permian (RSPP), Laredo Petroleum (LPI), Concho Resources (CXO), Matador Resources (MTDR), and Whiting Petroleum (WLL) are upstream producers operating in the Permian Basin.
Laredo Petroleum forms 1.1% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Whiting Petroleum accounts for 0.23% of the iShares U.S. Energy ETF (IYE). If the Permian Basin’s oil production falls, midstream operators transporting oil and gas in this region would also be negatively affected. These operators include MLPs like Magellan Midstream Partners (MMP), Regency Energy Partners (RGP), Plains All American Partners (PAA), and Energy Transfer Partners (ETP).
About the Permian Basin
The Permian Basin is a combination of the Midland Basin and the Delaware Basin in West Texas and southern New Mexico. According to the EIA (U.S. Energy Information Administration), the Permian Basin produces the most crude oil in the United States.
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