The Permian Basin | January 2021
Located in West Texas, the Permian Basin has been producing oil for over 100 years. It leads the US in oil production and estimates put 43 billion bbl of oil still in the Permian; 80% of those reserves are believed to be at less than 10,000 feet. Some top formations are the Wolfcamp, Upper/Lower Spraberry, and the Leonard.
State Drilling Statistics (End of January)
Active Drilling Rigs in Basin- 192
Total Rigs in Texas- 182
Total Rigs in United States- 384
Total U.S. Rigs down 56% YTD
Permian Top Producers
Top Gas Producer – Cimarex Energy
Top Oil Producer – Diamondback Energy
New Mexico Displeased
New Mexico is one of many Western states whose budget was already struggling before the federal land drilling moratorium. A heavy dependency on oil and gas had been rewarding in the past especially when it generated enough money to afford free in-state college tuition. Unfortunately, too much of the land in New Mexico is federal land. In 2018, lease sales of that federal land brought in half billion dollars to the state, and opened more of the Permian basin to operators, bringing in even more revenue as taxes. Even if New Mexico was to fully rely on renewable power in the area, neither the state or federal government would collect royalties or severance tax on alternative forms of energy. New Mexico currently provides a 10% tax credit on solar, and deems the tech tax exempt in property value. Free college is going to struggle to exist if the state cannot find a way to balance its budget.
Exxon SEC Probe
A recent whistleblower report claims that Exxon is under investigation from the SEC. The report claimed the company was overinflating the value of a key Permian asset, and pushing drilling plans that were far too optimistic. At least one of the employees who was bringing this report to the SEC had been fired last year when whispers of internal valuation disagreements began to circulate. Both the SEC and Exxon have declined to make public comment on the issue at present, or terminations possibly surrounding it. In March of 2019, Exxon CEO Darren Woods unveiled his plan to increase oil and gas production in the Permian by one million barrels a day by as early as 2024. This would have amounted to roughly 25% of Exxon’s overall production before COVID hit. After COVID, Exxon finally announced budget cuts in November, and pulled back on aggressive development previously planned. The whistleblower complaint reads, “No one I knew in the organization thought it was possible; the pressure to deliver on Woods’s promise to the market permeated the organization.” When employees delivered estimates that were far lower than what the organization had expected, they were encouraged to report an optimistic “learning curve,” that would decrease the amount of time it would take to drill each well.
While it is easy to view the Keystone XL cancelation as mostly detrimental to budgets, safety, and relations, some Permian producers remain optimistic. Kirk Edwards, CEO of Latigo Petroleum says he’s “never understood why the Permian people have been supportive of it because it’s direct competition to us. And, this pipeline being taken away, to me, is a relief for the Permian producers out here.” He continues on to mention the fact that Canada burns about 3 billion cubic feet of gas per day to heat up their tar sands to a point that allows oil to be mobile, so it is much dirtier than the oil produced in Texas which now flares at a record low since 2012. Additionally, most operations in Texas take place on private lands, so they are safe from that as well. The biggest threat at this point is the potential to ban fracking, but that is nothing more than a rumor at this point.
Top Gas Producers (2020 cum)
Top Oil Producers (2020 cum)
Texas Oil Production
Texas Gas Production
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