Permian activity expected to pick up in 2018

Oil, Permian, Permian Basin activity is helped by oil prices

By Corey Paul.  Permian Basin oil production hit an all-time record high this year with drillers expecting a further boost in activity in 2018 as prices inch higher.

The energy consultancy IHS Markit recently estimated production in the region reached 815 million barrels or more in 2017, exceeding the previous peak of 790 million barrels set in 1973. And next year should push the Permian Basin to a new record.

“The magnitude of the rebound in Permian Basin activity in liquids production is unprecedented,” said Reed Olmstead, director of energy research and analysis at IHS Markit. “Not so long ago, many in the industry were saying the Permian was dead, but the Phoenix has again risen from the ashes and is soaring to new heights.”

Today, the Permian Basin is producing more than 2.7 million barrels of oil per day, the Energy Information Administration estimates. IHS estimates the basin still holds 60 to 70 billion barrels of recoverable resources or about twice as much as all the oil produced in the region first began pumping crude in the 1920s.

“It’s a very easy explanation: We are seeing record numbers of production coming out of the Permian Basin now because literally from Midland and Odessa all the way out to Pecos is the epicenter of the shale boom,” said Kirk Edwards, an Odessa oilman who is president of Latigo Petroleum. “And as technology continues to improve and the oil prices continue to get higher we will continue to see even higher production over the next decade.”

The Permian Basin activity as measured by the rig count of 398 remains below the peak count of 2014. But companies are drilling longer wells that produce more oil per foot.

“One well being drilled today easily out-produces three wells that were getting drilled in 2014,” Edwards said.

Rising Permian Basin activity and production is driven by horizontal drilling and hydraulic fracturing could contribute to an oversupplied market and mean downward pressure on oil prices while lessening the country’s reliance on imports.
Increased oilfield activity also means an economic boom for the Odessa area.

National benchmark oil prices are inching toward $60 per barrel amid declining stockpiles and efforts by OPEC to limit production.

Meanwhile, the most recent quarterly survey of energy executives by the Federal Reserve Bank of Dallas showed a general expectation that new drilling will increase or remain near current levels in 2018. And it reflected greater confidence going into the New Year, particularly among the sort of oilfield services firm that makes up the bulk of Odessa’s workforce.

Signs of expansion included continued oil production growth, rising employment and increased utilization of oilfield services equipment, among other indicators.

“We have a couple of new projects that are creating the increased activity,” said an oil company respondent in the anonymous comments section. “However, we see new activity throughout the Permian Basin.”

A respondent from a service company said that “it is certainly looking better as West Texas operations are at full tilt.”

Respondents also pointed to challenges such as difficulty hiring workers like truck drivers, decline rates of oil wells that require new drilling to keep up, and “too much gas for too little infrastructure.”

“Oil prices appear to be high enough to support some additional drilling in 2018, but not high enough to significantly boost activity just yet,” Dallas Fed Senior Economist Michael Plante said. “A little more than half of the respondents think the rig count will be higher six months from now but almost all respondents think West Texas Intermediate crude prices need to be more than $60 to see a substantial increase in the oil rig count.”

SOURCE: by Corey Paul


Compiled and Published by GIB KNIGHT

Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of, an online resource designed for mineral owners in Oklahoma.


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