Weekly shale crude oil rig movement
For the week ending June 19, among the key shales, crude oil rigs fell by two in the Eagle Ford Shale, while they fell by one in the DJ-Niobrara. Meanwhile, the crude oil rig count rose by one each in the Williston and the Permian Basin. We’ll discuss the Permian Basin rigs in more detail in the next part of this series.
Shale gainers and losers
The Williston Basin lost 98, or 56%, of its oil rigs in the past year. The Williston Basin includes the Bakken Shale—one of the most prolific crude oil shale plays in the US. The Eagle Ford Shale in South Texas lost 127, or 60%, of its oil rigs. However, the Cana-Woodford Shale in Oklahoma’s Anadarko Basin added five oil rigs, an increase of 20%, during this period.
The lower Bakken and Eagle Ford rig count can lower crude oil production growth. It can even lead to a fall in production. This will affect upstream crude oil producers like Denbury Resources (DNR) and Pioneer Natural Resources (PXD). Falling production in this region can also lower the revenue for midstream MLPs (master limited partnerships) like Targa Resources (NGLS) and Plains All American Pipeline (PAA).
Weekly changes in shale natural gas rigs
Among the major resource shales, the Eagle Ford added two rigs. The Marcellus added one natural gas rig last week. These gains were partially offset by a fall in the Utica Shale’s rig count.
Shale natural gas for one year
In the 12 months to June 19, 2015, the number of gas rigs in the Haynesville Shale and the Marcellus Shale fell by 40% and 18%, respectively. In the past year, the Eagle Ford Shale added 16 rigs to its natural gas rig total—the most of any shale play in the US. The falling Marcellus rig count will negatively affect crude oil producers like EQT Corporation (EQT). EQT accounts for 0.82% of the Energy Select Sector SPDR ETF (XLE).
Higher Eagle Ford production can positively affect midstream MLPs like Enterprise Products Partners (EPD), Energy Transfer Equity LP (ETE), and large midstream companies like Williams Companies (WMB).
Why key US shales are important
According to the EIA (U.S. Energy Information Administration), the key seven shales including the Bakken, Eagle Ford, Hanynesvlle, Marcellus, DJ-Niobrara, Permian, and Utica accounted for 95% of the domestic oil production growth and all domestic natural gas production growth during 2011–2013.