Crude oil rig movements
For the week ending July 2, among the key shale rigs, crude oil rigs rose by three in the Eagle Ford Shale. Crude oil rigs also rose by two in the Williston Basin. Rigs rose by one each in the Utica and the Permian shales. We’ll discuss the Permian Basin rigs in more detail in the next part of this series.
The Williston Basin lost 102, or 57%, of its crude 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 120, or 58%, of its oil rigs. However, the Cana-Woodford Shale in Oklahoma’s Anadarko Basin added seven oil rigs—a 28% rise—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 these regions can also lower the revenue for midstream MLPs (master limited partnerships) like Targa Resources (NGLS) and Plains All American Pipeline (PAA).
Natural gas rigs
Among the major resource shales, the Marcellus lost one natural gas rig, while the DJ-Niobrara lost two gas rigs last week.
In the 12 months to July 2, 2015, the number of gas rigs in the Haynesville Shale and the Marcellus Shale fell by 37% and 17%, respectively. The falling Marcellus rig count will negatively affect natural gas producers like EOG Resources (EOG) and EQT (EQT). EQT accounts for 0.82% of the Energy Select Sector SPDR ETF (XLE).
In the past year, the Eagle Ford Shale added 13 rigs to its natural gas rig total—the most of any shale play in the US. Higher Eagle Ford production can positively affect midstream MLPs like Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Williams Partners (WPZ).
Why key US shales are important
According to the EIA (U.S. Energy Information Administration), the seven key shales including the Bakken, Eagle Ford, Haynesville, Marcellus, DJ-Niobrara, Permian, and Utica accounted for 95% of the domestic crude oil and natural gas production growth from 2011 to 2013.