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The Permian Basin Rig Count Crashes Again

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Mar. 25 2015, Updated 5:06 p.m. ET

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 Laredo Petroleum (LPI), Occidental Petroleum (OXY), and Antero Resources (AR). Together, Laredo Petroleum and Antero Resources form 2.9% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Occidental Petroleum is 3.4% of the iShares US Energy ETF (IYE).

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Comparing Permian rig counts with other rigs

Currently, there are 825 working oil rigs in the US. The Permian Basin has 285 of these rigs—more than any other region. The Eagle Ford Shale has 122 active oil rigs, the Williston Basin has 99, and the Mississippian Lime has 44.

Last week, the Permian Basin’s oil rig count fell by 20 over the previous week’s count. This was the 15th 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 5%. The Permian Basin rig count fall moderated for a couple of weeks before the rate of decline picked up again in the last couple of weeks.

One-year rig count comparison

In the past year, Permian Basin activity declined, losing 225 oil rigs. The Permian Basin rig count is now at its lowest level since October 2010.

The Williston Basin lost 87 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 South Texas lost 78 oil rigs, while the Cana-Woodford Shale in Oklahoma’s Anadarko Basin added 12 oil rigs.

Horizontal rigs are 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% of the total. On March 23, 2012, there were 484 rigs, and only ~25% 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 ~4%.

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