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Permian Basin activity signals changes to oil rig count

Alex Chamberlin - Author
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Dec. 4 2020, Updated 10:52 a.m. ET

The Permian Basin

The Permian Basin is located in western Texas and southern New Mexico. It generally refers to a combination of the Delaware Basin and the Midland Basin. According to the U.S. Energy Information Administration, the Permian Basin is the largest crude oil producing region in the United States.

Rig counts in the Permian Basin can gauge drilling activities for upstream companies. These companies include Chevron Corporation (CVX), Cabot Oil & Gas (COG), Concho Resources (CXO), and Occidental Petroleum (OXY). CVX and OXY together form 17.3% of the SPDR S&P Oil & Gas Exploration & Production ETF (XLE).

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Comparing Permian rig counts with others

Currently, there are 1,140 working oil rigs in the United States. The Permian Basin has 413 of these rigs, more than any other region. The Eagle Ford shale has 151 active oil rigs, the Williston Basin has 135, and the Mississippian Lime has 53.

The Permian Basin rig count is now at its lowest since May 2011.

In the past year, Permian Basin activity was lower because it lost 65 oil rigs. There were also 42 oil rigs shut down in the Williston Basin. The Williston Basin includes the Bakken Shale, one of the most prolific crude oil shale plays in the United States. The Eagle Ford shale in East Texas lost 36 rigs, while the Cana-Woodford Shale in Oklahoma’s Anadarko Basin added 12 oil rigs.

Last week, the Permian Basin’s oil rig count decreased by 37 compared to the previous week. This was the ninth straight weekly decline in the Permian oil rig count and an 8% decline from the previous week. Overall, the weekly US crude oil rig count was down 6%.

Horizontal rigs on the rise in the Permian Basin

Horizontal rigs account for 71% of the Permian Basin’s total rig count. Vertical rigs account for 27%, and directional rigs account for ~2%. By way of comparison, on February 10, 2012, there were 483 rigs, and only ~23% of the rigs were horizontal. At the time, rigs in the Permian Basin were mainly vertical, accounting for ~73% of the Permian Basin rigs. Directional rigs accounted for ~3%.

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

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