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Evaluating the Large Rig Movers in Natural Gas: Eagle Ford and Utica

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Crude oil shale rig movements

Among the key shale movements in the week ending October 30, the Utica Shale lost four, while the Permian and the Eagle Ford shales lost two crude oil rigs each. Meanwhile, the DJ-Niobrara Shale added one crude oil rig in the week ending October 30. Nine more crude oil rigs were idled in the rest of the US basins during the week ending October 30.

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A closer look

As of October 30, the Williston Basin has lost 129, or 67%, of its crude oil rigs over 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 142 rigs, or 69%, 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 Matador Resources (MTDR) and Pioneer Natural Resources (PXD), could drive this fall.

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, one natural gas rig each was idled in the Haynesville and DJ-Niobrara shales during the week ending October 30. On the other hand, the Utica and Permian shales added three and two natural gas rigs, respectively, during the same week. One more natural gas rig came online in the rest of the shales combined during the same one-week period.

In the 12 months ending October 30, 2015, the DJ-Niobrara Shale and the Marcellus Shale natural gas rig counts fell more than any other. During this period, the number of natural gas rigs in the DJ-Niobrara Shale and the Marcellus Shale fell by 93% and 49%, respectively. The DJ-Niobrara Shale accounts for nearly 10% of all key shale natural gas production, while the Marcellus Shale produces 36% of the aggregate key shale natural gas production.

The falling Marcellus Shale rig count would mean natural gas producers like EOG Resources (EOG) and EQT Corporation (EQT) are slowing down operations in this area. Falling production could affect these producers negatively. EQT accounts for 0.7% of the Vanguard Energy ETF (VDE).

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In the past year, the Cana-Woodford and the Eagle Ford shales saw the lowest natural gas rig reductions. Steady Eagle Ford production could positively affect midstream MLPs like Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Williams Partners (WPZ), which all operate in the region.

Key US shales

According to the EIA (US Energy Information Administration), the seven key shales—Bakken, Eagle Ford Shale, Haynesville Shale, Marcellus Shale, Niobrara-DJ Basin, Permian Basin, and Utica Shale—accounted for 95% of US oil production growth and 100% of natural gas production growth from 2011 to 2013.

In the next part of this series, we’ll discuss the Permian Basin’s rigs and their importance in the US oil and gas industry.

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