Crude oil shale rig movements
For the week ended August 28, crude oil rigs rose by five in the Eagle Ford Shale. One crude oil rig was added in both the Haynesville Shale and the Permian Basin last week. On the other hand, the rig count declined by one in the DJ-Niobrara Shale. Five more crude oil rigs were idled 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 US. The Eagle Ford Shale in South Texas lost 115 rigs, or 58%, over the same period.
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 Eagle Ford Shale lost seven natural gas rigs, while one natural gas rig was idled in the DJ-Niobrara Shale and the Marcellus Shale each last week. Meanwhile, the Permian Basin added one natural gas rig last week. The rest of the shales lost one more natural gas rig last week as well.
In the 12 months to August 28, 2015, the Haynesville Shale 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 34% and 35%, respectively. The falling Marcellus rig count could mean natural gas producers like EOG Resources (EOG) and EQT (EQT) were slowing down operations in these shales. Decreased production could affect these producers negatively. EQT accounts for 0.98% of the Energy Select Sector SPDR ETF (XLE).
In the past year, the Eagle Ford Shale added seven rigs to its natural gas rig total, the most of any shale play in the US. 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 (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 rigs and their importance in the US oil and gas industry.