Permian Basin Rig Count Surged Ahead in Week Ending July 10

Permian Basin rig count

Currently, there are 645 working oil rigs in the US. The Permian Basin has 239 of these rigs, more than any other region. The Eagle Ford Shale has 81 active oil rigs, the Williston Basin has 71, and the Mississippian Lime has 18.

The Permian Basin’s oil rig count rose by eight in the week ending July 10. On average, two oil rigs were added in the four weeks ending July 10 in the Permian Basin. In comparison, the basin lost one rig on average in the four weeks ending July 2. The Permian Basin rig count has risen only five times in the past eight months.

Permian Basin Rig Count Surged Ahead in Week Ending July 10

In the 12 months ending July 10, 2015, the number of active oil rigs in the Permian Basin fell by 318, or 57%. The Permian Basin rig count is at its lowest level since May 2010. But, rigs in the basin seem to be turning around.

What does this mean?

Over the past eight months, the steep fall in the Permian Basin’s rig count suggests that producers operating in this region have reduced their drilling activity. This will likely slow their production growth or even reduce production. RSP Permian (RSPP), Laredo Petroleum (LPI), Concho Resources (CXO), Matador Resources (MTDR), and Whiting Petroleum (WLL) are upstream producers operating in the Permian Basin.

Laredo Petroleum forms 1.1% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Whiting Petroleum accounts for 0.40% of the iShares U.S. Energy ETF (IYE). If the Permian Basin’s oil production falls, midstream operators transporting oil and gas in this region would also be hit. These include MLPs (master limited partnerships) like Magellan Midstream Partners (MMP), Regency Energy Partners (RGP), Plains All American Partners (PAA), and Energy Transfer Partners (ETP).

About the Permian Basin

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