The Permian Basin | June 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- 337 (-15)
Total Rigs in Texas- 329 (-18)

Total Rigs in the United States- 675 (-7)
Total U.S. Rigs 10.7% YTD

Top Oil Producer – Occidental

Basin Highlights

America is Going Through an Oil Boom–and This Time It’s Different

The Permian Basin is leading the current oil and gas production boom in the United States. With ~$120 oil seen after the beginning of the Ukrainian War and $6+ gas seen in the depths of winter, oil and gas producers stood to gain tremendously. However, this time, producers have been more disciplined with activity. The number of rigs up across the country is levelizing with more steady ~$70 WTI but at a lower peak than was seen in previous booms (2014 and 2018, for instance). Some of this may be ascribable to more efficient drilling, longer laterals, more intense completion designs, and other factors, but it is clear that oil and gas operators are not keen to drill all of their returns this time.

Oil and Gas Growth Slows in the Permian Basin as Region Leads US in Fossil Fuels

The Permian Basin produced 5.672 million barrels per day in June and is expecting 5,763 million barrels per day in July. The Bakken produced 1.2 million barrels per day in June and the Eagle Ford produced 1.1 million barrels per day. American oil production increased by 5.6% last year, with the Permian accounting for such a large share of that growth that it now accounts for nearly 50% of American oil production by itself. The Permian produced 22.9 billion cubic feet of natural per day in July, second only to the Appalachian region at 35.4 billion cubic feet per day. However, the rate of growth in the Permian was an additional 60 million scfd in June whereas Appalachia added 25 million scfd. 

Natural Gas Production in the Permian Basin Hit a Record High in 2022

In 2022, natural gas production in the Permian Basin averaged 21 bcf/d, a 14% jump from 2021 and a record for the basin. Nearly all of this increased production is from associated gas–gas that comes as a (sometimes unwanted) byproduct of oil production. The American rig count has declined for six consecutive weeks, and the frac spread count was falling in early June (256 on June 2) which means that this rate of gas production increase will ease, but as Permian wells age, they “gas out”. When the pressure in the reservoir becomes lower, gas, at first found in solution in the oil, will come out of solution and thus the ratio of gas to oil production climbs precipitously. This may support gas production rates while oil production rates may stabilize.

Chevron Looking to Sell Some Permian Basin Oil and Gas Properties

Chevron is looking to sell ~$100 million worth of Permian assets in West Texas in order to highgrade its Permian asset portfolio. Chevron holds 2.2 million acres in West Texas and has long been one of the largest leaseholders in the basin. Two parcels, together about 32,000 acres, have been put up for auction. These parcels presently produce 1,818 boe/d. Reserves on the parcel are estimated to be 770,000 net boe. Chevron, whose acreage in Reeves and Culberson Counties is still checkerboarded from the Railroad days, is busily engaged in buying, selling, and swapping smaller tracts of land in the basin in order to block up enough contiguous sections to drill two- and three-mile laterals.

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