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Permian, Haynesville among Larger Rig Movers in Week Ended October 9

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Crude oil shale rig movements

For the week ended October 9, among the key shales, the Permian Basin and Eagle Ford Shale lost ten and two crude oil rigs, respectively. The Utica Shale and the Williston Basin also lost one crude oil rig each last week, while one crude oil rig was added in the DJ–Niobrara shale. Four more crude oil rigs were added in the rest of the US basins last week.

The Williston Basin has lost 129, or 66%, 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 135 rigs, or 67%, over the same period.

Lower Bakken and Eagle Ford rig counts could lower crude oil production. Crude oil producers operating in these key US shales, including Denbury Resources (DNR) and Pioneer Natural Resources (PXD), could drive this fall.

Falling production in these regions could also lower the revenues for midstream MLPs that operate there such as Targa Resources (NGLS) and Plains All American Pipeline (PAA). Pioneer Natural Resources constitutes 0.1% of the SPDR S&P 500 ETF (SPY).

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Natural gas shale rigs

Among the larger rig movers, the Marcellus Shale lost one rig, the Haynesville Shale lost two rigs, and the Eagle Ford Shale lost one rig in the week ended October 9. Two more natural gas rigs went offline in the rest of the shales combined last week.

In the 12 months ended October 9, 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% and 44%, respectively.

The falling Marcellus Shale rig count would mean natural gas producers such as EOG Resources (EOG) and EQT (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).

In the past year, the Eagle Ford Shale 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 Eagle Ford production could positively affect midstream MLPs such as 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.

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