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Permian and Eagle Ford among Larger Rig Movers Last Week

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Crude oil shale rig movements

Among the key shale movements in the week ending October 16, the Permian Basin and Eagle Ford Shale lost three and two crude oil rigs, respectively. The Haynesville Shale and the Williston Basin also lost one crude oil rig each last week. Three more crude oil rigs were idled in the rest of the US basins last week.

The Williston Basin has lost 129, or 67%, 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 132 rigs, or 67%, over the same period.

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Lower Bakken and Eagle Ford rig counts could lower crude oil production. Crude oil producers operating in these key US shales, including Matador Resources Company (MTDR) and Pioneer Natural Resources (PXD), could drive this decrease. Pioneer Natural Resources constitutes 0.1% of the SPDR S&P 500 ETF (SPY).

Falling production in these regions could also lower the revenues of midstream MLPs that operate there such as Targa Resources (NGLS) and Plains All American Pipeline (PAA).

Natural gas shale rigs

Among the larger rig movers, the Permian Basin and the Haynesville Shale added one rig each, in the week ending October 16. On the other hand, the Eagle Ford Shale lost one natural gas rig last week. Two more natural gas rigs went online in the rest of the shales combined last week.

In the 12 months ending October 16, 2015, the Marcellus Shale and the Haynesville Shale natural gas rig counts decreased the most. During this period, the number of natural gas rigs in the Marcellus Shale and the Haynesville Shale fell by 43%, each.

The falling Marcellus Shale rig count would mean natural gas producers such as EOG Resources (EOG) and EQT Corporation (EQT) are slowing down operations in this area. Decreased production could affect these producers negatively. EQT accounts for 0.8% of the Energy Select Sector SPDR ETF (XLE).

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In the past year, the Permian Basin saw more natural gas rig additions than any other shale play in the United States. In this period, it added three natural gas rigs. Higher Permian production could positively affect midstream MLPs such as Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and ONEOK Partners (OKS), which operate in this region.

Key US shales

According to the EIA (U.S. Energy Information Administration), the seven key shales—the Bakken, the Eagle Ford Shale, the Haynesville Shale, the Marcellus Shale, the Niobrara-DJ Basin, the Permian Basin, and the Utica Shale—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.

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