uploads/2015/03/Permian3.jpg

The Permian Basin Rig Count Bleed Continues

By

Updated

The Permian Basin

The Permian Basin is a combination of the Midland Basin and the Delaware Basin in western Texas and southern New Mexico. According to the US Energy Information Administration (or EIA), the Permian Basin produces the most crude oil in the US.

Rig counts in the Permian Basin can gauge the drilling activities of upstream companies. These companies include Chevron Corporation (CVX), Cabot Oil & Gas (COG), Occidental Petroleum (OXY), and EOG Resources (EOG). Together, Occidental Petroleum and EOG Resources form 6.9% of the SPDR S&P Oil & Gas Exploration & Production ETF (XLE).

Article continues below advertisement

Comparing Permian rig counts with other rigs

Currently, there are 866 working oil rigs in the US. The Permian Basin has 305 of these rigs, more than any other region. The Eagle Ford Shale has 127 active oil rigs, the Williston Basin has 104, and the Mississippian Lime has 42.

Last week, the Permian Basin’s oil rig count fell by 22 over the previous week’s count. This was the 14th straight weekly decline in the Permian oil rig count and a 7% decline from the previous week. Overall, the weekly US crude oil rig count was down 6%. The Permian Basin rig count fall moderated for a couple of weeks before the rate of decline picked up again last week.

One year rig count comparison

In the past year, Permian Basin activity declined because it lost 206 oil rigs. The Permian Basin rig count is now at its lowest level since November 2010.

The Williston Basin lost 80 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 64 oil rigs, while the Cana-Woodford Shale in Oklahoma’s Anadarko Basin added ten oil rigs.

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 26%, and directional rigs account for ~3% of the total. By way of comparison, on March 16, 2012, there were 484 rigs, and only ~23% of the rigs were horizontal. At the time, rigs in the Permian Basin were mainly vertical, accounting for ~71% of rigs there. Directional rigs accounted for ~5%.

Advertisement

More From Market Realist