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Shale Rig Counts: Eagle Ford Made Large Moves Last Week

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Aug. 25 2015, Published 12:34 p.m. ET

Crude oil shale rig movements

We’ll discuss the key US shale rig counts in this article. For the week ended August 21, the crude oil rig count rose by three in the Williston Basin. One crude oil rig was added in the Haynesville Shale last week. On the other hand, the rig count declined by six crude oil rigs in the Eagle Ford Shale and two crude oil rigs in the Permian Basin. Six more crude oil rigs were added in the rest of the US basins last week.

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 115 rigs—60% 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 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 also lower the revenues 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 shale rigs

Among the major resource shales, the Utica Shale lost two natural gas rigs while one natural gas rig each idled in the Marcellus and Haynesville shales last week. Meanwhile, the Eagle Ford Shale added four natural gas rigs last week.

In the 12 months leading to August 21, 2015, the Haynesville and the Marcellus shale natural gas rig counts decreased the most. During this period, the number of natural gas rigs in the Haynesville Shale and the Marcellus Shale fell by 33% and 30%, respectively. The falling Marcellus rig count could mean natural gas producers like EOG Resources (EOG) and EQT Corporation (EQT) were slowing down their operations in these shales. Decreased production could affect these producers negatively. EQT accounts for 0.85% of the Energy Select Sector SPDR ETF (XLE).

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In the past year, the Eagle Ford Shale added 14 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—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.

Next, we’ll discuss the Permian Basin rig count and its importance for the US oil and gas industry.

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