Back in the Aug. 19 issue of Data Insights (Thick as thieves: WTI to Permian rig count) we highlighted the strong correlation of WTI to Permian rig count. Essentially, WTI has historically been a strong predictor of how many rigs will be operating in the Permian and that for every $1 WTI rises or falls, five rigs are either added or taken out of the basin three months later. That correlation has started to slip some with the unrelenting ramp in rig count in the basin (figure below), averaging 239 rigs for Dec but ending the year closer to 260. WTI, on the other hand, bounced off of the $30 lows in Q1 and has a much more moderate gain in Q3 and Q4, suggesting a rig count closer to 200. Naturally, this begs the question of whether this indicates a paradigm shift for the basin or if rigs will pull back and level out. Given the buying activity in the area and the expectation of producers, a pullback would seem the less likely of the two scenarios. Regardless, the ramp has been good for companies like TRGP, ETP, WTG and WES.
Read more here: The Surge