What’s Driving the Weakness in US Rig Counts?
(Continued from Prior Part)
Permian Basin rig count
Currently, there are 675 working oil rigs in the United States. The Permian Basin accounts for 251 of these rigs, more than any other region. The Eagle Ford Shale has 83 active oil rigs, the Williston Basin has 73, and the Mississippian Lime has 20.
The Permian Basin oil rig count increased by one in the week ended August 28. On average, one crude oil rig was added in the four weeks ended August 28 in the Permian Basin. The basin added two rigs on average in the four weeks ended August 21.
In the 12 months ended August 28, 2015, the number of active oil rigs in the Permian Basin fell by 301, or 55%. The Permian Basin rig count is at its lowest level since July 2010. However, rig counts had seemed to be turning around 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 reduced their drilling activity. This reduction can slow these companies’ production growth or even reduce their production. The number of oil rigs in the Permian Basin has increased eight times in the past nine weeks, hinting at a production increase here. If Permian rigs continue to increase, as they did last week, Permian Basin production may continue rising.
To find out more about oil rig counts in the Permian Basin, read Market Realist’s Permian Shale’s July Crude Oil Production Growth Slowest in 2015. 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 1.56% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Whiting Petroleum accounts for 0.26% of the iShares North American Natural Resources (IGE). If the Permian Basin’s oil production rises, midstream operators transporting oil and gas in this region would also benefit. 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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