Is Crude Oil Price Weakness Dragging the US Rig Count?
Permian Basin rig count
Currently, there are 662 working oil rigs in the United States. The Permian Basin accounts for 249 of these rigs, more than any other region. The Eagle Ford Shale has 78 active oil rigs, the Williston Basin has 72, and the Mississippian Lime has 20.
The Permian Basin oil rig count decreased by two in the week ended September 4. On average, one crude oil rig was idled in the four weeks ended September 4 in the Permian Basin. The basin added one oil rig on average in the four weeks ended August 28.
In the 12 months ended September 4, 2015, the number of active oil rigs in the Permian Basin fell by 308, or 55%. The Permian Basin rig count is at its lowest level since July 2010. However, rig counts 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 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 ten weeks, hinting at a potential production increase here. However, if Permian rigs continue to decrease, as they did last week, Permian Basin production may once again be hampered.
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 1.17% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Whiting Petroleum accounts for 0.25% of the iShares North American Natural Resources ETF (IGE). If the Permian Basin’s oil production falls, it would reduce oil and gas volume of midstream operators transporting oil and gas in this region. 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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