Is a Turnaround on the Horizon for Declining Rig Counts?
(Continued from Prior Part)
Permian Basin’s rig count
Currently, there are 635 working oil rigs in the United States. The Permian Basin has 231 of these rigs, which is more than any other region. The Eagle Ford Shale has 85 active oil rigs, the Williston Basin has 76, and the Mississippian Lime has 23.
The Permian Basin’s oil rig count decreased by one last week. Two Permian Basin oil rigs dropped in the four weeks ending June 5, compared to four in the four weeks ending May 29. The Permian Basin rig count has increased only twice in the past 27 weeks.
What this means
Over the past six months, the steep fall in the Permian Basin’s rig count suggests that producers operating in this region have reduced their drilling activity. This will likely slow their production growth or even reduce production. 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 1.61% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Concho Resources accounts for 0.88% of the iShares U.S. Energy ETF (IYE).
One-year comparison
In the 12 months ending June 12, 2015, the number of active oil rigs in the Permian Basin declined by 319, or 58%. The Permian Basin rig count is at its lowest level since May 2010.
The Williston Basin lost 98, or 56%, of its oil rigs in the past year. The Williston Basin includes the Bakken Shale, one of the most prolific crude oil shale plays in the United States. The Eagle Ford Shale in South Texas lost 121, or 59%, of its oil rigs. But the Cana-Woodford Shale in Oklahoma’s Anadarko Basin added six oil rigs, or an increase of 24%, during this period.
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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