Upstream Texas - Fall/Winter 2017 - 12
Exxon (XTO) to up-and-comers including EP
Energy, Matador, Diamondback, and Parsley.
Currently, Drillinginfo is forecasting the region
to grow crude production by 667,000 Bbl/d
between December 2016 and December 2017,
and another 427,000 Bbl/d by December 2018
(Figure 1). Among the producers, Pioneer,
Concho, and Parsley are each expected to
grow by more than 40,000 Bbl/d of crude
production by December 2017, compared
to the same point last year. On the natural
gas side, analysts are expecting 1.13 Bcf/d
in growth between December 2016 and
December 2017, and another 0.9 Bcf/d by
the end of 2018.
crude and natural gas at $60 WTI (U.S. Crude
Benchmark Price) and $3.25 Henry Hub (U.S.
Natural Gas Benchmark Price) will keep global
prices from reaching historic peaks again. U.S.
unconventional supply has changed the crude
and natural gas markets.
While numerous basins are influential
to overall U.S. production growth, the
Permian Basin is unparalleled as the single
most important driver of crude growth
Permian Oil & Gas Forecast
Long-known as a legacy conventional basin,
operators in the Permian are now enjoying
the benefits of decades of geologic research,
numerous economic stacked pay zones, and a
friendly business environment for oil and gas.
Producers have taken lessons learned from
other explored unconventional plays such as
the Haynesville, Barnett, Fayetteville, Bakken,
Eagle Ford, Marcellus, and Utica, and are now
applying them in West Texas. Type-curves are
improving, activity is up, and the basin now
represents the largest contribution to growing
U.S. oil production.
In line with broader U.S. rig trends, the changes
in the Permian's rig count since 2016 have been
dramatic. The basin's rig count reached a low
of 129 in May 2016, but has since rebounded
to 400. As of the first week in September,
Pioneer Natural Resources and Concho were
leading activity with 20 rigs each, followed
by Anadarko at 18 rigs, Apache at 17 rigs,
Parsley and Exxon (XTO) each holding 16 rigs,
and Occidental Petroleum at 15 rigs. Other
operators make up the remaining 278 rigs.
More specifically, Drillinginfo tracks
26 individual operators in the Permian, many
of which are members of TIPRO, ranging from
the large players such as Concho, Apache and
Not only is activity up in the region, but each
rig is now more productive than it has ever
been because producers are able to drill wells
faster and have increased the overall intensity
of well completions to maximize productivity.
These efficiency gains are here to stay and
include more proppant injected per lateral
foot, extended laterals, and multi-bench drilling
(drilling multiple formations from one well bore).
The impact of efficiencies on breakeven
economics is dramatic. Permian crude
breakevens are illustrated in the figure to
the left, and range between $27.48 for the
Delaware Basin, Bone Spring formation Tier 1
assets to $100+ for numerous Tier 3 assets, and
small basins on the outskirts of the Permian
such as the Val Verde and Marathon-Ouachita.
A Turning Point for Industry
Lead by production gains from the Permian
Basin, 2017 has shown to be the right time for
a comeback for the U.S. oil and gas industry.
Drilling and production efficiencies are at
all-time highs, the rig count has increased by
144 percent since the low in May 2016, and the
United States is on track to grow production
for years to come.
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