US Rig Counts Fell Last Week after Rising for 3 Weeks
(Continued from Prior Part)
Permian Basin rig count
Currently, there are 638 working oil rigs in the United States. The Permian Basin accounts for 241 of these rigs—more than any other region. The Eagle Ford Shale has 77 active oil rigs, the Williston Basin has 69, and the Mississippian Lime has 19.
The Permian Basin oil rig count rose by two rigs in the week ended July 17. On average, two crude oil rigs were added in the four weeks ended July 17 in the Permian Basin. The basin also lost two rigs on average in the four weeks ended July 10. The Permian Basin rig count has risen only three times in the past 32 weeks.
In the 12 months ended July 17, 2015, the number of active oil rigs in the Permian Basin fell by 309, or 56%. The Permian Basin rig count is at its lowest level since May 2010. But rig counts in the basin seem to be turning around.
What does this mean?
Over the past eight months, the steep fall in the Permian Basin’s rig count suggests that producers operating in this region have reduced their drilling activity. This reduction will likely slow these companies’ production growth or even reduce their 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 1.2% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Whiting Petroleum accounts for 0.40% 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 hit. 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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