Why the Permian Basin is important to US oil



The Permian Basin

The Permian Basin is located in western Texas and southern New Mexico. The name “Permian Basin” usually refers to a combination of the Delaware Basin and the Midland Basin. According to the U.S. Energy Information Administration (or EIA), the Permian Basin is the largest crude-oil-producing region in the United States.


Comparing Permian Basin rig counts with other basins

Currently, there are 1,609 oil rigs at work in the U.S. The majority of the rigs, roughly 560, are in the Permian Basin. The Eagle Ford has 202 oil rigs, the Williston and Bakken have 194, and the Mississippian has 78.

In 2014, the Permian Basin added 101 oil rigs, compared to 9 in the Williston and Bakken. DJ-Niobrara and Cana Woodford added 18 and 16 rigs in 2014, respectively.

The Ardmore Woodford in Oklahoma lost six oil rigs this year, and the Barnett shale in Texas lost seven rigs. Horizontal rigs account for 59% of this total, vertical rigs account for 38%, and directional rigs account for ~3%.

As of October 7, 2011, there were 465 rigs in total, of which only ~17% were horizontal. At the time, rigs in the Permian Basin were mainly vertical. Vertical rigs accounted for ~77% of rigs in the Permian Basin and directional rigs accounted for ~6%.

Key stocks and ETFs

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Permian Basin rig counts can gauge upstream companies’ drilling activity in the Permian Basin. These companies include Chevron Corporation (CVX), Concho Resources Inc. (CXO), EOG Resources Inc (EOG), and Marathon Oil Corporation (MRO). Some of these companies are part of the S&P Oil & Gas Exploration & Production ETF (XLE).

The total U.S. onshore rig count, not just the Permian Basin, has been going strong, reaching a two-year high recently. To find out where the growth is coming from, read the next part of this series.


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