The Permian Basin |April 2023

Field Overview

Located in West Texas, the Permian Basin has been producing oil for over 100 years. The Permian leads the US in oil production and analysts estimate that there is 43 Gbbl of oil still in the Permian; 80% of reserves in the basin 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- 343 (-7)
Total Rigs in Texas- 357 (-9)

Total Rigs in the United States- 720 (-11)
Total U.S. Rigs 1.0% YTD

Top Oil Producer – Occidental

Permian Permitting Data
Permits Approved – 581

Basin Highlights

US Permian Has Not Seen Peak Oil Production – Occidental CEO

The EIA forecasted that the Permian Basin would be producing 5.62 million barrels of oil per day by the end of April 2023. Occidental CEO Vicki Hollub indicated that increasing production from the Permian Basin would help to offset production declines from some of the other US shale basins. Though, with slackening oil prices, the Permian is only expected to see a daily production increase of 26,000 bpd from March to April–the smallest month-over-month production increase in six months. Pioneer’s outgoing CEO, Scott Scheffield, indicated that he believed oil prices would go to $90 and $100 and hover there for the duration of the year.

Negative Gas Prices Return to Permian Basin as Overlapping Maintenance Looms

Spot natural gas prices in West Texas reentered negative values in mid-April. Kinder Morgan had compressor maintenance on its Gulf Coast Express pipeline and on its Permian Highway pipeline–both of which help to move gas out of the glutted Permian Basin. With weaker demand for gas due to oncoming summer weather, the energy crisis in Europe largely averted, and no new LNG export terminals coming online this year, natural gas has grim near-term future price prospects.

EIA: Permian Basin to Hit Record Oil, Gas Production in May

On April 17, the EIA announced that the Permian Basin would rise to an all-time daily production record in May of 5.693 million bpd. The Permian superseded its pre-COVID production record late 2021 and continues to set all-time production records nearly every month. The Williston basin, by contrast, saw its all-time production record in the latest months of 2019 and has not been able to recover to these levels. The Eagle Ford hit its production peak in 2015 and never recovered from the crash that took place at about that time.

Is a Buyout Gusher Coming in the Permian Basin? Why a Takeover Boom Looms

With many large-cap firms possessing enormous quantities of cash and a desire to strengthen footprints and inventories in the Permian Basin, financial strategists like McKinsey are forecasting a slew of M&A activity in the Permian in the second half of 2023. Exxon was recently reported to have been in preliminary talks with Permian giant Pioneer. Chevron remains committed to producing 1 million barrels per day from the Permian in the very near future, which could spur acquisition, and ConocoPhillips has recently integrated Shell’s and Concho’s permian acreage into its portfolio and may be on the hunt for more Permian acreage.

Operators with Highest Permitting

Top Oil Producers—————————— –

Counties with Highest Permitting

Rig Count

Texas Oil Production

Texas Gas 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