By: Vaughn McCrary
Production out of the Permian increased from both 2015 to 2016 and 2016 to 2017, which is tough to believe given the industry environment during the period. As seen in the figure below, the EIA expects Permian basin production to continue to increase over the next two years compared to relatively flat projections for the other major basins, including the Eagle Ford, Bakken, and Niobrara. The Permian region benefits from a couple distinct geological advantages. In addition to its sheer size relative to other basins, the Permian has numerous producing zones more than 1,000 feet thick that make up the stacked play. This compares to the Eagle Ford’s producing zones of only 200 – 300 feet. With the proliferation of horizontal drilling, the difference in geology has contributed to extremely favorable economics, which are being noticed by many in the industry. James McManus, CEO at Energen, said on the Company’s most recent earnings call, “We have gained a lot of efficiencies in our drilling and completion activities, and our per-unit operating costs continue to decline. As a result and in combination with high-quality rock, our outstanding assets in the Permian Basin generate excellent rates of return even at a $45 flat oil price.” These favorable economics should continue to drive activity in the region.
For further reading, please visit the OFS Newsletter – February Edition – 2.15.17.
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