Regional Models of Drilling Activity: Forecasting Rig Count in The Permian Basin

Abstract

Ordinary least squares regression analysis is used to develop a model to forecast the Permian Basin rig count. Comparative analyses of various independent variables in linear, logarithmic and rate-of-change form indicate that approximately ninety percent of the variation in rig count can be explained using four independent variables. These variables represent Windfall Profits Tax, the maximum marginal personal income tax rate, crude oil price, and hourly wages of production workers in oil and gas extraction.