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Permian Basin Rig Count Only Marginally Lower

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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 U.S. Energy Information Administration, 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 3% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Occidental Petroleum makes up 3.4% of the iShares U.S. Energy ETF (IYE).

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Comparing Permian rig counts with others

Currently, there are 813 working oil rigs in the US. The Permian Basin has 283 of these rigs—more than any other region. The Eagle Ford Shale has 124 active oil rigs, the Williston Basin has 97, and the Mississippian Lime has 43.

Last week, the Permian Basin’s oil rig count fell by two over the previous week’s count. This was the 16th consecutive weekly decline in the Permian oil rig count and a ~1% decline from the previous week. Overall, the weekly US crude oil rig count was also down ~1%. This week’s Permian rig count fall was the lowest in the past four months.

One-year rig count comparison

In the past year, Permian Basin activity has declined, with a loss of 232 oil rigs. The Permian Basin rig count is now at its lowest level since October 2010.

The Williston Basin lost 88 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 85 oil rigs, while the Cana-Woodford Shale in Oklahoma’s Anadarko Basin added 14 oil rigs.

Horizontal rigs are on the rise in the Permian Basin

Horizontal rigs account for 70% of the Permian Basin’s total rig count. Vertical rigs account for 28%, and directional rigs account for ~2% of the total. On March 30, 2012, there were 491 rigs, and only ~25% of the rigs were horizontal. At the time, rigs in the Permian Basin were mainly vertical, accounting for ~70% of rigs there. Directional rigs accounted for ~5%.

In the following part of this series, we’ll tackle rig counts across the spectrum.

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