Oil & Gas News

Oil majors tread cautiously in Permian shale

Oil, Permian, Permian Basin, flaring, gas

By: Stephen Cunningham – Argus Media – Oil Majors ExxonMobil and Chevron are ramping up drilling operations in the Permian basin of west Texas and New Mexico, with a focus on squeezing out further efficiencies as they keep a tight lid on spending.

Chevron is adding rigs and completion crews to the biggest US shale formation in the second half of this year, expecting production to surpass 600,000 b/d of oil equivalent (boe/d) by the end of the year. And ExxonMobil plans to boost Permian production by about 40,000 boe/d in the third quarter from the 400,000 boe/d produced in the second quarter. The two majors have joined other large Permian producers in being able to take advantage of a significant reduction in service prices last year when the Covid-19 pandemic struck, according to consultancy Rystad Energy. They have also been able to offset subsequent service cost inflation with additional efficiency gains this year.

“There is a general consensus among Permian operators these days that the inflection point has already been reached for well productivity performance,” Rystad head of shale research Artem Abramov says, adding that there is still room for efficiency gains in drilling and completion cost structure. Getting more from less is the priority after producers were forced to drastically scale back spending and drilling during last year’s market crash. And with Opec+ spare capacity yet to make it back to the market, no one is in any rush to accelerate output.

Chevron added a completion crew in the Permian in July and expects to bring in another before the end of this year. It also expects to add at least one or two more drilling rigs to the five that are already in place. “We are going to stay disciplined around those returns,” Chevron upstream chief Jay Johnson says. The company is returning to “efficient factory drilling” after focusing on lease retention in the previous year and a half, Johnson says. But he warns that the market is still oversupplied despite the overall picture of increasing oil demand. “And that is why we are being cautious, we are being balanced, and we are going to continue to monitor the market as we continue to decide how to ramp up our activity levels in the Permian,” Johnson says.

Oil

Delayed payoff

ExxonMobil’s full-year capital budget will be at the lower end of its $16bn-19bn guidance range, but the Permian is one of the key regions that will see higher spending in the second half of this year. The company spent heavily on above-ground infrastructure in the early days and is seeing the benefits now, chief executive Darren Woods says. ExxonMobil boasted of “really hitting on all cylinders and getting the sorts of efficiency that we have been targeting for the last couple of years” from the Permian in terms of boosting cash flow and capital efficiency and driving down development costs.

ExxonMobil has doubled lateral-feet-per day drilling rates compared with 2019, and recently set an industry record by drilling a 12,500-foot (3,810m) lateral well in just 12 days in the Delaware basin. Drilling rates are around three times more efficient than they were in 2019. “Another way to think about this is that the eight rigs we are running today are achieving the same lateral length as it took close to 25 rigs to drill just two years ago,” senior vice-president Jack Williams says.

Faster hydraulic fracturing rates have resulted in a 40pc decline in drilling and completion costs, and lease operating expenses are also down. Drilling efficiencies were highlighted by independents in second-quarter results, including Pioneer Natural Resources, one of the largest acreage holders in the Permian. And Diamondback Energy boosted its Permian oil output guidance after wells outperformed forecasts.

The crossroads of energy information for minerals owners in Oklahoma. Where you can: See recent prices of mineral and lease transactions. Receive an offer to lease or buy your minerals.

Find relevant news stories on the most active areas, including the Scoop and Stack Plays.

Data Powered by Oseberg

Today’s E&P world is rapidly shifting towards data-driven decision making, but those decisions are only as good as the data behind them. Access Oseberg's deep, accurate, and detailed pool of insight-rich industry data with our powerful analytical and search tools and get the clearest picture of what's happening as soon as it happens.

Disclaimer

This web site is maintained solely for the personal use of our visitors. Although we at Oklahoma Minerals have made all reasonable efforts to provide accurate information, we cannot guarantee the completeness, timeliness or accuracy of the information contained herein. Nothing in this web site contains investment advice. Any decisions based upon the information contained in this web site are the sole responsibility of the user.

Copyright © 2021 OklahomaMinerals.com

To Top
ConocoPhillips Says USA Regulations Hold Back SupplyRead More