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The Permian Basin rig count is on a spectacular fall

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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 US 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 Laredo Petroleum (LPI). CXO and LPI together form 3.1% of the SPDR S&P Oil & Gas Exploration & Production ETF (XLE).

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Comparing Permian rig counts with others

Currently, there are 1,056 working oil rigs in the United States. The Permian Basin has 365 of these rigs, more than any other region. The Eagle Ford shale has 145 active oil rigs, the Williston Basin has 127, and the Mississippian Lime has 54.

The Permian Basin rig count is now at its lowest since March 2011. The Permian has lost 200 rigs, or 35%, in the past ten weeks.

In the past year, Permian Basin activity was lower because it lost 115 oil rigs. The Williston Basin also lost 49 oil rigs. 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 42 rigs, while the Cana-Woodford Shale in Oklahoma’s Anadarko Basin added 14 oil rigs.

Last week, the Permian Basin’s oil rig count decreased by 48 compared to the previous week. This was the tenth straight weekly decline in the Permian oil rig count and a 12% decline from the previous week. Overall, the weekly US crude oil rig count was down 7%.

Horizontal rigs on the rise in the Permian Basin

Horizontal rigs account for 70% of the Permian Basin’s total rig count. Vertical rigs account for 27%, and directional rigs account for ~3%. By way of comparison, on February 17, 2012, there were 485 rigs, and only ~22% 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 ~5%.

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

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