U.S. Rig Facts:
Utilization of onshore drilling rigs is up 232% year over year
North Dakota is up 202% year over year in drilling rig activity
Oklahoma is up 221% year over year in drilling rig activity
Texas is up 263% year over year in drilling rig activity
Texas and Oklahoma make up 66% of all active onshore drilling rigs in the United States
Texas, Oklahoma, New Mexico and Louisiana make up 77% of all drilling rig activity in the United States
Who should care about these facts?
At the end of the day, this data confirms that the shale plays in these states are the most economically viable of any shale plays in the United States. So, if you are a stock buyer and looking for companies with assets in the upstream midstream and service sector with nice or substantial exposure to these areas, then it makes sense to know why and where the action is taking place.
In addition, this observation is not rocket science but a mere understanding of the economics of the US shale plays. It is about midstream access, midstream costs and supported by barrels of oil equivalency per dollar invested to extract such a BOE that counts. Do not get me wrong, there are great shale resources and each $5.00 incremental increase in US west Texas Intermediate pricing per barrel means one more move towards the increased activity in other shale play and their viability but also an exponential ratcheting up of exploration in the main trends in Texas, Oklahoma and New Mexico.
How to use this information is quite easy. Stocks, focus on the serviced side and know there will be thousands of wells drilled needing servicing for decades to come. Midstream, be careful in that there is only so much bandwidth for midstream players before oversaturation occurs and prices paid per unit gathered and transported starts a downward trend in 5-8 years. In upstream, I see these stock as sort term plays with an inherent risk as one might see in drilling the wells themselves. Buy right, win big. Buy wrong, take a major setback.