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For Immediate Release

Uncovering the Permian’s Potentials & Pitfalls

New report exposes tremendous economic benefits and infrastructure constraints as drilling prepares to ramp up in hottest oil basin in U.S.

Media Contact: Jon Haubert | 303.396.5996

Austin, TX (February 1, 2017) – In the latest installment of its Fundamental Edge market outlook series,
Drillinginfo has released an interim report on what has become the most watched oil and gas basin in the
U.S., the Permian Basin in West Texas/Southeastern New Mexico.

The Permian is arguably the hottest oil play in the U.S. right now and for good reason: it boasts the best
economics, has tremendous stacked pay potential, and producers are still realizing efficiencies from
further delineation of the plays, well completion advancements, and longer laterals.

Yet, infrastructure constraints could prevent the Permian from delivering oil, natural gas, and natural gas
liquids (NGLs) to end markets, and prevent it from experiencing its full economic and energy potential. In
Drillinginfo’s Permian Basin Midstream Analysis, analysts identify infrastructure-related problems that
could arise if the basin’s forecasted production growth is realized.

Key Findings from the Report:

  • Crude oil production will outpace takeaway capacity in the Permian Basin by the end of 2017 if
    flex capacity (quick, cheap capacity additions via pumping station installs on existing pipelines) is
    not brought online to accommodate the production growth. The Midland-to-Sealy pipeline will
    provide additional capacity by mid-2018, but even with the new pipeline and full additional
    flex capacity build-out, the Permian Basin will still need additional takeaway capacity by
    2020. Any delay in capacity additions, or additional drilling activity that further increases the rate
    of production growth, could lead to widening differentials for crude oil produced in the basin until
    capacity becomes available.
  • Cryogenic natural gas processing capacity is adequate to handle gross gas production from the
    Permian Basin through mid-2019. However, due to the disconnect between the location of
    the processing capacity and the geographical extent of the current production growth,
    additional processing capacity may be necessary in quickly growing gas producing parts
    of the Permian Basin (southern Delaware Basin in particular). To accommodate the projected
    wet gas volumes from new discoveries in the southern Delaware Basin (ex: Apache’s Alpine
    High), there will need to be local processing capacity built.
  • At first glance, dry gas takeaway is adequate to handle Permian production in the
    foreseeable future. However, the capacity that serves the Permian Basin also gathers from
    other markets – both upstream and downstream of the basin – and connectivity from the
    Midland is much more extensive than connectivity from the Delaware. Hence, not all
    capacity may be available for Permian Basin gas, and not all existing capacity is located where
    production is growing. The Delaware Basin is more gas-rich than its Midland Basin counterpart,
    and there will need to be additional takeaway capacity and connectivity within the basin.
  • Additionally, if the development of southern Delaware Basin gas-directed activity is as prolific as
    suggested by recent discoveries, the growth trajectory could be much steeper, further
    exacerbating the bottlenecks.

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