The Permian Basin | January 2020

Field Overview

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

Active Drilling Rigs in Basin- 406
Total Rigs in Texas- 395
Total Rigs in United States- 790
Total U.S. Rigs down 24% YTD

State Top Producers

Top Gas Producer – Apache
Top Oil Producer – Pioneer

Financial & Economic Updates

Chevron Swings to Large Loss on $10 Billion in Charges, Shares Sink

• Chevron Corp swing to a large fourth-quarter loss on weaker oil and gas prices and $10.4 Billion in charges as it stepped up efforts to cull unprofitable assets and shares of the No. 2 U.S. oil producer tumbled 3% in early trading
• In December, Chevron warned it could take up to $11 billion in writedowns on properties that were no longer economical: Appalachian shale gas properties, a proposed Canadian liquefied natural gas project and a U.S. offshore field.
• With oil prices weak, major oil companies including Chevron and Exxon Mobil Corp, have sought to raise cash and improve returns by putting properties on the market.

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State Highlights

Shell boosts crude output in top U.S. shale field to 250,000 bpd

• Royal Dutch Shell, which plans billions of dollars in spending on shale drilling projects, boosted output in the top U.S. shale field to 250,000 barrels per day in December, the company’s Permian Basin head said on Wednesday.
• Shell plans to spend about $3 billion (2.3 billion pounds) per year for the next five years on shale projects, said Amir Gerges, vice president of Permian assets for Shell, at the Argus Americas Crude Summit in Houston. It’s Permian Basin production rose more than 100,000 barrels per day in the last year.
• The Permian has 30 years of so-called “tier one” high quality drilling inventory and will remain at the heart of U.S. oil growth, Gerges said. But the industry faces challenges in the region, ranging from too much natural gas flaring to inadequate infrastructure and “even today’s investor sentiments,” he said.
• Previously, Shell indicated it might seek a way to expand its presence in the Permian, but during last week’s earnings call, Chief Executive Officer Ben van Beurden indicated the timing is not right for an acquisition.

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There’s a new boom in the Permian Basin – Wastewater

• In five years, the Permian is forecast to generate 32 million barrels of produced water per day, up from four million a day currently. By 2030, that number could rise to 38 million barrels daily, analysts say. And it will be increasingly difficult to dispose of the wastewater. Industry analysts say the basin will eventually run out of suitable places to drill disposal wells — another incentive for oil and gas operators to recycle.
• For every barrel of oil produced in the Permian, about four barrels of this “produced water” come out of the earth along with it. In 2018 alone, New Mexico’s share of the Permian Basin generated 42 billion gallons of oil and gas wastewater, according to the New Mexico Environment Department.
• For years, companies simply dumped the contaminated wastewater into disposal wells. Now, there’s keen interest in reusing that produced water for drilling – and even for other, more controversial purposes.

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Top Gas Producers

Top Oil Producers

Refining

Texas Gas Production

Texas Oil Production

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The information contained in this newsletter is provided by RARE
PETRO Engineering, PLLC via the following sources unless otherwise
noted:

www.eia.gov
www.drillinginfo.com
www.bhge.com
RARE Petro Analytics