Keys to the Kingdom in the Hands of a Few
The Permian Basin, found in West Texas and southeast New Mexico, is the busiest basin in the U.S. by a factor of five. This blog highlights which operators own the majority of remaining Permian drilling inventory and how operator development choices impact well performance. From assessing cost structures and efficiency metrics, the discussion extends to the evaluation of drill spacing unit (DSU) economics. For a full review of the Permian Basin, you can access our key report and presentation by clicking here. (Only available to Oil and Gas Research subscribers)
Enverus Intelligence® Research (EIR) provides subscribers with specialized insights into the Permian Basin, leveraging their deep expertise in North American shale and the Enverus PRISM® analytics platform. Their diverse professionals are equipped with extensive knowledge covering the entire energy spectrum, from geological assessment to financial analysis, distinguishes EIR from competitors. This well-rounded expertise guarantees that EIR’s strategies are not only data-driven but also finely tuned to help customers capitalize on the unique opportunities within the Permian Basin.
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The Permian Basin Inventory Breakdown
Remaining Inventory and Operator Influence
The Permian Basin stands at the forefront of U.S. shale in terms of remaining oil inventory. This inventory is predominantly owned by the seven largest operators (Exxon, Diamondback, ConocoPhillips, Chevron, Occidental, Devon and EOG), several of who gained substantial influence through notable acquisitions over the last few years. Such consolidation has led to a stark contrast in inventory availability between the large and the smaller to mid-size operators, a trend that is incentivizing many operators to explore for new development horizons.
Core Area Dominance
The Value of Strategic Positioning
The dominance of core areas across the Midland and Delaware sub-basins has become increasingly clear. These core areas are defined by their exceptional geological characteristics, making them of critical importance for operators. This superiority explains why large companies have focused heavily on acquiring land within these prime regions, as they offer much higher potential drilling returns and densities than other parts of the basin.
Decision Drivers in the Permian
Drill Spacing Unit Optimization: Balancing Returns and Value Capture
Permian Basin operators are carefully balancing near-term cash returns for shareholders and maximizing long-term value for each unit of land. Development planning requires key inputs such as geologic interpretation as well as empirical case studies to justify specific drill spacing unit designs. Enverus Drill Spacing Unit Analytics has become a key tool for operators to compare development plans and outcomes across the basin.
Striking the right balance between single well returns and resource capture has never been more critical. Chasing value can often result in over capitalization crushing returns in the process, while overcorrection leaves precious resource and value on the table. We leveraged an upcoming product, DSU Analytics, to both explain and inform decisions operators are making on a day-to-day basis.
Stephen Sagriff | Principal Analyst | Enverus Intelligence® Research
Conclusion and Insights
Looking Ahead
As EIR investigates what the future holds for the Permian Basin, it’s clear that the lowest-cost operators will continue to rapidly evaluate different development strategies to iterate and improve profitability. Leveraging industry-leading advanced analytics will play a big role helping these operators grow and adapt. If you’re looking for a full review of the Permian Basin, you can access our key report and presentation by clicking here. (Only available to Oil and Gas Research subscribers)
Interested in gaining deeper insights into the Permian Basin?
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*About Enverus Intelligence®| Research
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations, and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies, and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. See additional disclosures here.
Authors
Dane Gregoris:
Dane joined Enverus in 2014. His previous work experience includes positions at GLJ Petroleum Consultants and Encana. Dane leads the Oil & Gas Intelligence team and oversees a group of technical and financial specialists using advanced analytics to provide actionable insights. In his role he advises both corporate and institutional clients on strategic investment decisions and is frequently quoted in major media outlets on North American energy topics. Dane graduated from Queen’s University with a degree in geological engineering and is a CFA charter holder.
Stephen Sagriff:
Stephen joined Enverus’ (RS Energy) analyst team in January 2018 and leads the Permian Intelligence team. He has a reservoir engineering background in a business development capacity, having previously worked at RimRock Oil & Gas and interning at ConocoPhillips, both in Calgary. Stephen earned his bachelor’s degree in chemical engineering from the University of Calgary in 2016.
