Why Permian defied the falling oil rig counts last week


Nov. 27 2019, Updated 2:18 p.m. ET

Permian Basin

The Permian Basin is 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 1,568 oil rigs at work in the U.S. The Permian Basin has 560 of these rigs, more than any other region. The Eagle Ford has 197 oil rigs, the Williston and the Bakken have 192, and the Mississippian has 71.

In 2014, the Permian Basin added 101 oil rigs, while only seven were added in the Williston and the Bakken. DJ-Niobrara and Cana Woodford added 15 and 13 rigs in 2014, respectively. The Ardmore Woodford in Oklahoma lost five rigs this year. The Barnett Shale in Texas lost six oil rigs this year.

Last week, Permian rigs increased by five from the previous week. Horizontal rigs account for 60% of the Permian Basin’s total. Vertical rigs account for 38%. Directional rigs account for ~2%.

By way of comparison, back in November 4, 2011, there were 481 rigs in total. Only ~21% of the rigs were horizontal. At the time, rigs in the Permian Basin were mainly vertical. Vertical rigs accounted for ~75% of rigs in the Permian Basin. Directional rigs accounted for ~4%.

In the next part of this series, we’ll discuss how the rig trajectory mix changed.

Key stocks and exchange-traded funds (or ETFs)

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


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