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Permian Basin Oil Rig Crash Led the Way in Week Ended October 9

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Permian Basin oil rig count

Currently, there are 605 working oil rigs in the United States. The Permian Basin accounts for 230 of these rigs, more than any other region. The Eagle Ford Shale has 67 active oil rigs, the Williston Basin has 65, and the Cana-Woodford Shale has 34.

The Permian Basin oil rig count decreased by ten in the week ended October 9, 2015. On average, the Permian Basin crude oil rig decrease was five in the four weeks ended October 9. The basin’s oil rig count fall was two on average in the four weeks ended October 2. Four-week averages give a smoother view of this trend, which otherwise can be quite volatile on a weekly basis. On a smoothed basis, it looks like the drop in Permian crude oil rigs is accelerating.

In the 12 months ended October 9, 2015, the number of active oil rigs in the Permian Basin fell by 330, or 59%. In June, the Permian Basin rig count hit 231, its lowest level since July 2010.

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What does this mean?

The steep fall in the Permian Basin’s rig count over the past year suggests that producers operating in this region have reduced their drilling activities. Reductions can slow a company’s production growth or even reduce its production.

The number of oil rigs in the Permian Basin has increased eight times in the past 15 weeks, hinting at a potential production increase there. However, if Permian rigs continue to decrease as they did last week, Permian Basin production growth may once again stall or even decrease.

To find out more about oil rig counts in the Permian Basin, please read Permian Shale Oil Production Rose Again in August.

Upstream and midstream producers

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 2.1% of the SPDR S&P Oil and Gas Exploration and Production ETF (XOP). Whiting Petroleum accounts for 0.3% of the iShares North American Natural Resources ETF (IGE).

If the Permian Basin’s oil production declines, it would decrease the oil and gas volume of midstream operators transporting oil and gas in this region. These operators include MLPs such as 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 United States.

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