The Permian Basin | November 2020
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 November)
Active Drilling Rigs in Basin- 161
Total Rigs in Texas- 146
Total Rigs in United States- 320
Total U.S. Rigs down 60% YTD
Permian Top Producers
Top Gas Producer – Cimarex Energy
Top Oil Producer – Diamondback Energy
Exxon Takes a November Nosedive
Before dealing with its newest activist investor, Exxon began to announce big changes at the end of November. In addition to significantly cutting spending on exploration and production over the next four years, it also planned to write down up to $20 billion in investments in natural gas. This is a result of its first ever three consecutive quarters of loss. No longer will it be developing gas projects in Appalachia, the Rockies, Oklahoma, Texas, Louisiana, Arkansas, Canada, and Argentina. In order to not bleed any more money, future capital spending will be capped at $25 billion annually through 2025, and 14,000 employees will be let go. Tough times for Exxon, but it hopes to bounce back when markets recover, deliver to its investors, and become relisted on the Dow Jones. Exxon’s stock hasn’t been worth this little since 2003.
Apache Plays Surinam
Apache plans to reduce development in the Permian and pursue global developments amidst depressed prices. The company recently completed its third exploration test off the coast of Suriname which happened to be the best so far. With plans to finish another two exploration wells through the end of the year, Apache is hoping to prove its competence to partner Total. While activity abroad is going well, activity in the Permian will be suppressed. Apache’s Permian centerpiece, the Alpine High play, returned most of its shut in volumes but will continue to receive minimal funding through the end of 2020. If prices do recover and make new wells economic, they will change their plan. For now, they will continue investments in the Suriname project and focus on completing DUCs domestically.
Water Processing Capacity Increases
Even before the pandemic and pricing collapse of oil, operations were expanding in the Permian as more hydraulic fracturing operations bleed across the state boundary into New Mexico. While current pricing doesn’t necessarily support a huge increase in production, the few new wells that are being drilled process an immense amount of water. Hydraulic fracturing jobs can use anywhere from 1.5 million gallons of water to 16 million. This means every barrel of oil produced around 10 barrels of water can be returned from flowback and formation water. In order to serve clients dealing with this much water, Solaris Water Midstream announced it began operations in its fresh New Mexico facility servicing the Permian. The company expects two more water recycling centers to be complete by December. Once all 5 facilities are online, the company will have the capacity to recycle up to 900,000 barrels per day and store more than 3 million. They also plan to develop a network of mobile recycling systems that can be deployed to sites in need for faster water reuse in New Mexico fields. All of these systems combined with 500 miles of pipeline infrastructure will allow Solaris to service 2500 square miles in southeast New Mexico.
Top Gas Producers (2020 cum)
Top Oil Producers (2020 cum)
Texas Oil Production
Texas Gas Production
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