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Shale Rig Counts: Williston Bounces Back, Utica Inches Up

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Jul. 20 2015, Published 3:04 p.m. ET

Crude oil rig movements

For the week ended July 17, as part of the key shale rig count, crude oil rigs rose by two rigs in the Permian Basin. The crude oil rig count also rose by one rig in the DJ-Niobrara shale. However, these gains were more than offset by four oil rigs idling in the Eagle Ford Shale and two idling in the Williston. We’ll discuss the Permian Basin rigs in more detail in the next part of this series. Other basins lost four more crude oil rigs last week.

The Williston Basin lost 115, or 63%, 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 United States. The Eagle Ford Shale in South Texas lost 126 rigs—62% of its oil rigs—over the same period.

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The lower Bakken and the Eagle Ford rig counts can lower crude oil production growth. They can even lead to a fall in production. This fall would affect upstream crude oil producers operating in these key US shales, including Denbury Resources (DNR) and Pioneer Natural Resources (PXD). Falling production in these regions could also lower the revenue for midstream MLPs like Targa Resources (NGLS) and Plains All American Pipeline (PAA), which operate here. PXD is 0.1% of the SPDR S&P 500 ETF (SPY).

Natural gas rigs

Among the major resource shales, the Marcellus lost three natural gas rigs while one natural gas rig was idled in the Haynesville shale last week. The Utica shale added one natural gas rig last week. Four more natural gas rigs were added in other basins last week.

In the 12 months leading to July 17, 2015, the number of natural gas rigs in the Haynesville Shale and the Marcellus Shale fell by 40% and 23%, respectively. The falling Marcellus rig count could mean natural gas producers like EOG Resources (EOG) and EQT Corporation (EQT) were slowing down operations in these shales. Decreased production could affect these producers negatively. EQT accounts for 0.79% of the Energy Select Sector SPDR ETF (XLE).

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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 United States. Higher Eagle Ford production could positively affect midstream MLPs like Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Williams Partners (WPZ), which operate in this region.

Key US shales

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 US oil production growth and 100% of natural gas production growth from 2011 to 2013.

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