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Interpreting the Permian Basin Rig Count Decrease as of October 30

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Permian Basin oil rig count

As of October 30, 2015, there were 578 working oil rigs in the United States. The Permian Basin accounts for 222 of these rigs, more than any other region. The Eagle Ford Shale has 64 active oil rigs, the Williston Basin has 63, and the Cana-Woodford Shale has 32.

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In-depth look at the Permian Basin

The Permian Basin oil rig count fell by two in the week ending October 30, 2015. On average, the Permian Basin crude oil rig count fell by five rigs in the four weeks ending October 30. The Permian’s oil rig count fell by six rigs on average in the four weeks ending October 23. Four-week averages give a bigger picture of rig counts.

In the 12 months ending October 30, 2015, the number of active oil rigs in the Permian Basin fell by 333, or 60%. Currently, the Permian Basin rig count is at its lowest since May 2010.

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 risen eight times in the past 18 weeks, however, hinting at a potential production rise there. Still, if Permian rigs continue to fall as they did last week, Permian Basin production growth may stall once again, or even fall.

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RSP Permian (RSPP), Laredo Petroleum (LPI), Concho Resources (CXO), Matador Resources (MTDR), and Whiting Petroleum Corporation (WLL) are upstream producers operating in the Permian Basin. Laredo Petroleum forms 0.1% of the Vanguard Energy ETF (VDE). Whiting Petroleum accounts for 0.2% of the iShares North American Natural Resources ETF (IGE).

If the Permian Basin’s oil production falls, it would lower 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 (US Energy Information Administration), the Permian Basin produces the most crude oil in the United States.

To find out more about oil rig counts in the Permian Basin, please read Permian Shale Oil Production Up in September: Who Benefited?

Continue to the next part of this series for a discussion of the US horizontal rig count as of October 30.

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