The Permian Basin has long been the most important oil and gas producing area in the United States. A lot of history has focused on the buildup of resources that allowed the USA to ultimately bring the Second World War to a conclusion. What fueled those resources? The Permian Basin. And now, if we look at current permitting activity in the United States, the brightest spot of activity is clearly in the Permian Basin. So let’s get on with this Permian Basin update.$1.3 billion in the Permian, so while we are seeing contraction in most of the other North American basins, the Permian is still inspiring big deals in the down market.
The Permian Basin has had three major depositional events – Mississippian, Pennsylvanian, and Permian. Let’s look at the structure through some of those periods in the more easterly Midland Basin portion of the Permian.
Let’s look at the Midland Basin in a different way, the following image shows a cross section of logs and formation picks (we have over 18,000 picks in the Midland Basin alone) on a west-to-east cross section through Martin and Howard Counties.
New Production Capacity
DI’s New Production Capacity (or NPC) takes active rigs, corroborates them with permits, and then compares those new wells with recent near-neighbor production to determine the potential capacity of each new well drilled. We can then add those figures up into a national figure (The DI Index) or break the analysis down even further. It is a more precise leading indicator of production that will likely come online in the next few months than rig count alone.
When we look at New Production Capacity by basin across the US for the month of September, again we see the clear dominance of Permian Basin operations.
Image Source: Drillinginfo New Production Capacity National Report
Focusing back into the Permian and further breaking down into Operator and County NPC, we see Occidental and Concho are leading the pack of operators, and that Midland and Reeves Counties have the current geographic pole positions.
Let’s take a closer look at operations within those two top counties. In the following image, on the left we have Reeves county (in the heart of the horizontally focused Delaware Basin) and on the right, Midland County (in the more diverse trajectory-wise Midland Basin).
Concho drilled one well in Reeves, but boy is it positioned to be a boomer! Occidental drilled 7 new wells, and on average their wells are poised to perform quite well. Over in Midland County we see a wider variety in NPC, likely as a result of the heavier vertical/conventional activity in that part of the Permian.
The Permian enjoys not only favorable geology but also one of the highest concentrations of onshore oil & gas professionals and already built infrastructure in the world. Because of its favorable economics and no political risk, the Permian Basin will likely play a dominant role as a global crude oil supply buffer for the foreseeable future.
What do you think? Leave a comment below.
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