The Permian Basin | May 2022

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- 349 (+7)
Total Rigs in Texas- 362 (+5)
Total Rigs in United States- 753 (+25)
Total U.S. Rigs 60% YTD

Top Producer by BOE – Pioneer

Permian Permitting Data
Permits Approved – 504

Basin Highlights

Extraction Companies Continue to Ride the Brakes

Even as multiple oil-based commodities continue to break record-high price points, producers are hesitant to grow their asset and production portfolios. Now investors are begging companies to keep spending low so that they can take the cash they earn for either dividends or buybacks. Investors have made it clear, that getting debt paid down and returning cash to shareholders is the new priority. More than half of American oil is produced by public companies who are returning around ⅓ of their cash to investors. Still, even if this wasn’t the case, growth in the Permian would likely be minimal. Supply chain distribution issues have extended the drill-to-pump timeline from a speedy 3 months to as long as a year or more. The cost of steel is now 3 times higher than usual. Some rig rates are at $30,000 per day and contracts for new rigs could still rise as much as 40% by next year. While most of the world is emerging from the pandemic, industrial trade systems continue to struggle to limit how much energy production can grow domestically.

Bullish Investors Eager for More Takeaway Capacity

Two new pipelines in the Permian are being expanded to increase gas capacity by more than a billion cubic feet per day. The Whistler Pipeline will have its capacity increased from 2 billion to 2.5 billion SCF per day according to a recent announcement. The Whistler connects the Permian to the Waha gas hub to allow gas to reach markets and exporters on the Gulf Coast. The Permian Highway Pipeline will be getting another 650 million cubic feet of capacity itself in order to mobilize even more gas from the Permian to the coast. All investors were eager to pursue the project as most are excited about the energy rebound in the face of a global energy shortage. In 2021, cash flow to the E&P sector grew by $493 billion and Rystad Energy estimates it could grow by $834 billion this year. These increases follow the $126 billion drop witnessed in 2020.

ExxonMobil Masterfully Manages Methane Mitigation

ExxonMobil received an “A” grade certification for managing methane emissions from independent marketing intelligence company MiQ. The inspected facilities were located in Poker Lake, New Mexico, and affords the company the ability to boast as the first company to earn the top mark for control of methane emissions from associated gas. Responsible Energy Solutions carried out the third-party audit using standards from MiQ to assess the effectiveness of fixed monitoring systems, aerial imaging, optical gas imaging cameras, proprietary acoustic sensors, and leak detection and repair practices. This is surely the first of many headlines of this nature as demand for certified gas continues to rise and emissions are reduced across all scopes.

Operators with Highest Permitting

Top Producers By BOE—————————— –

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