Energy Analytics

Permian Well Cost Trends – Reflation and Innovation, Divergence and Convergence

byEnverus

Wells costs in the Permian dropped in recent years as operators applied lessons learned to improve capital efficiency. In response to the plummeting commodity prices in mid-2020, activity across all shale plays hit the brakes, resulting in a substantial decline in service costs.

This demand-driven service cost deflation occurred concurrently with continued operational innovation in the Permian. While public operators continue to highlight their shift in priority from production growth to cash flow generation, the recent rally in commodity prices spurred a rebound in activity in the basin. The increase will reveal the degree to which well cost declines of the past year have been driven by structural changes relative to deflationary forces.

Our analysis of operator-guided 2021 well costs demonstrates divergent trends in the Permian between the Midland and Delaware basins. Drilling and completion costs are coming in 8% higher in the Midland but 4.8% lower in the Delaware compared to 2H20 values. The contrast indicates operators are anticipating further efficiency gains in the Delaware that more than offset service cost reflation; however, service cost increases in the Midland are expected to outpace operational improvements.

The average per-foot cost to drill, complete and equip a well in the Delaware, among the operators sampled, is expected to be 41% greater than in the Midland in 2021, a narrower gap than the 59% higher costs seen in 2H20. We believe the Delaware Basin has more upside for efficiency improvements as the play is still in its transition to full-field development and has fewer multi-bench, large-scale developments than the Midland.

FIGURE 1 | Estimated 2021 Permian Well Costs Versus Actual 2H20

Enverus

Enverus

Energy’s most trusted SaaS platform — creating intelligent connections that uncover insights and opportunities to deliver extraordinary outcomes.

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

energy-transition
Energy Transition
ByCarson Kearl

In a world where energy value can make up a small portion of the revenue stream from emerging business models, what else is at play? Enverus Intelligence Research® views effective energy transition business as taking advantage of two key additive...

field-representative
Intelligence Oilfield Services
ByErin Faulkner

Permitting information for oil and gas wells is one of the most readily available and least lagged pieces of data on industry activity, but it is often seen as a poor indicator of future drilling activity.

Enverus Press Release - Exploring falling rigs and rising production
Energy Analytics Minerals
ByEnverus

While horizontal drilling and hydraulic fracturing significantly enhance well productivity, they have had the opposite effect on the land department.

operators
Intelligence
ByJoseph Gyure, Editor, Enverus Intelligence

All seven regions covered by the Enverus Day Rate Survey saw rates rise sequentially for the second time in three months in January as confidence started to strengthen among U.S. land drilling contractors.

accurate-grid-forecastin
Energy Transition Intelligence
ByJoseph Gyure, Editor, Enverus Intelligence

Ørsted took a blade to its project pipeline, reducing its ambition to 35-38 GW of installed capacity by 2030 from the previous 50 GW.

ofs-blog
Intelligence
ByJoseph Gyure, Editor, Enverus Intelligence

SLB has reaffirmed its 2024 financial guidance, part of an effort by international oilfield services companies to reassure investors after the Saudi Ministry of Energy called off plans to increase its maximum sustainable capacity by 1 MMbo/d to 13 MMbo/d...

EV-parent-image-4
Analyst Takes Energy Transition
ByEnverus

Despite the relatively scant incentives for buying an EV in the U.S. compared to other countries, the U.S. Environmental Protection Agency (EPA) presented its plan in 2023 to tighten tailpipe emissions regulations.

Enverus Blog - Increase visibility and efficiency with OpenTicket Mobile digital field ticketing software
Trading and Risk
ByEnverus

Amid significant volatility in global energy markets, U.S. President Joe Biden’s decision to temporarily halt approvals for pending liquefied natural gas (LNG) projects seems to defy conventional trading wisdom. This audacious move has given rise to a variety of viewpoints...

Enverus Blog
Intelligence Trading and Risk
ByEnverus

In the ever-changing energy landscape, understanding market fluctuations, weather conditions and system resilience is paramount when factoring ideas for trading opportunities.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Register Today

Get Energy Transition Research updates straight to your inbox by filling out the form below.

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert