US Crude Oil, Natural Gas Rig Counts Rise: Is This a Good Thing?
(Continued from Prior Part)
Permian Basin rig count
Currently, there are 670 working oil rigs in the United States according to Baker Hughes (BHI). The Permian Basin accounts for 252 of these rigs—more than any other region. The Eagle Ford Shale has 79 active oil rigs, the Williston Basin has 72, and the Mississippian Lime has 19.
The Permian Basin oil rig count rose by five in the week ended August 7. On average, three crude oil rigs were added in the four weeks ended August 7 in the Permian Basin. The basin added four rigs on average in the four weeks ended July 31.
In the 12 months ended August 7, 2015, the number of active oil rigs in the Permian Basin fell by 303, or 55%. The Permian Basin rig count is at its lowest level since July 2010. But rig counts in the basin seem to be turning around.
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 have been reducing their drilling activity. This reduction will likely slow production growth at these companies or even reduce production. But if Permian rig numbers continue to increase, as they’ve been doing for the past six weeks, Permian Basin production may grow.
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% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Whiting Petroleum accounts for 0.27% of the iShares U.S. Energy ETF (IYE).
If oil production rises in the Permian Basin, midstream operators transporting oil and gas in this region would also benefit. These operators include MLPs Magellan Midstream Partners (MMP), Regency Energy Partners (RGP), Plains All American Partners (PAA), and Energy Transfer Partners (ETP), among others.
About the Permian Basin
The Permian Basin cuts across the Midland Basin and the Delaware Basin located in West Texas and southern New Mexico. According to the U.S. Energy Information Administration, the Permian Basin produces the most crude oil in the United States.
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