Crude oil rig movements
We’ll discuss the US shale rig counts in this article. For the week ended August 7, crude oil rigs rose by five in the Permian Basin. The crude oil rig count also rose by one rig each in the Eagle Ford Shale and the Williston Basin. One crude oil rig went offline across the other basins last week. We’ll discuss the Permian Basin rigs in more detail in the next part of this series.
The Williston Basin lost 119, or 62%, 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 118 rigs—60% of its oil rigs—over the same period.
Lower Bakken and Eagle Ford rig counts could reduce crude oil production growth. This could even lead to a fall in production. The fall could be driven by 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 cut into the revenues of midstream MLPs including Targa Resources (NGLS) and Plains All American Pipeline (PAA), which operate there. PXD makes up 0.1% of the SPDR S&P 500 ETF Trust (SPY).
Natural gas rigs
Among the major resource shales, the Haynesville and the Permian shales added one natural gas rig each, while one natural gas rig was idled at both the Eagle Ford and Marcellus shales last week. Four natural gas rigs were added at other basins last week.
In the 12 months leading up to August 7, 2015, natural gas rig counts at the Haynesville and the Marcellus shales decreased the most. During this period, the number of natural gas rigs in the Haynesville Shale and the Marcellus Shale fell by 30% and 24%, respectively.
The falling Marcellus rig count could mean natural gas producers including EOG Resources (EOG) and EQT (EQT) were slowing down operations there. Decreased production could affect these producers negatively. EQT accounts for 0.86% of the Energy Select Sector SPDR ETF (XLE).
In the past year, the Eagle Ford Shale added 15 rigs to its natural gas rig total—the most additions of any shale play in the United States. Greater Eagle Ford production could positively affect midstream MLPs that operate in this region, including Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Williams Partners (WPZ).
Key US shales
According to the U.S. Energy Information Administration, the seven key shales—including the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian, and Utica—accounted for 95% of US oil production growth and 100% of natural gas production growth from 2011 to 2013.