Oil & Gas News

Permian Investments In The Billions Despite Price Dip

Permian, West Texas

By: Carlsbad Current-Argus – Some of the Permian Basin’s largest oil and gas producers announced plans to continue increasing extraction operations and investments in the region next year as production was forecast to increase, even as oil prices dipped due to an impending global recession.

Much of the spending would go to decreasing the environmental footprint of fossil fuel extraction, according to company announcements, amid shifts in government policies and investor pressure for the industry to address pollution.

ExxonMobil, the parent company of Permian-leading XTO Energy said on Dec. 8 it planned to maintain up to $25 billion in capital expenditures (CAPEX) through 2027 while investing $17 billion in “lower carbon” initiatives – an increase of about 15 percent.

According to the announcement, the company plans to focus its investments, more than 70 percent, in the Permian Basin in U.S. along with other “high-return” regions like Guyana and Brazil.

Upstream oil and gas production was expected to grow by about 500,000 barrels of oil equivalent (boe) per day, the company said, to a total of 4.2 million boe per day.

Most of that, about 50 percent, was expected to come from the high-return regions in the Permian Basin and others around the world.

About 90 percent of the investments will be targeted to projects reducing emissions by up to 50 percent by 2030, compared with 2016 levels.

“We view our success as an ‘and’ equation, one in which we can produce the energy and products society needs – and – be a leader in reducing greenhouse gas emissions from our own operations and also those from other companies,” said ExxonMobil Chief Executive Officer Darren Woods.

Another key player in Permian Basin oil and gas production, Chevron said on Dec. 7 it would budget about $14 billion in capital spending in 2023, up 25 percent from 2022.

The company said operations in the Permian and other areas of high return on investment would drive the company’s profitability in the coming years.

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 “Our CAPEX budgets remain in line with prior guidance despite inflation,” said Chevron CEO Mike Wirth. “We’re winning back investors with capital efficient growth, a strong balance sheet, and more cash returned to shareholders.”

Increasing investments from major oil and gas companies were met with upticks in drilling rigs in the Permian Basin, along with New Mexico and Texas which share the basin.

New Mexico added two rigs in the last week for its total of 106 rigs as of Dec. 9, according to the latest data from Baker Hughes, about 16 more rigs than a year ago – the second highest in the U.S.

Texas had the most in the nation with 370 rigs after dropping one in the last week, records show, but with 98 more rigs than the state had a year ago.

The Permian Basin in total held steady at 350 rigs, Baker Hughes report, 64 more rigs than a year ago.

But that growth could face obstacles tied to a possible recession in the coming years, driving down oil prices to the lowest levels since Russia’s invasion of Ukraine in February.

The international conflict led to Russia’s removal from global markets, putting more strain on U.S. fossil fuel producers and driving up the value of domestic oil and gas.

On Dec. 12, domestic oil was trading at $72 a barrel, according to the Chicago Mercantile Exchange, and expected to hold at about the same in January and February.

That continued a downward trend starting at the year’s peak at $122 a barrel on June 8 and dropping to about $82 a barrel three months later on Sept. 9, according to historical data from Nasdaq.

A Dec. 12 report from the New Mexico Legislative Finance Committee pointed to economic sanctions on Russia causes oil prices to spike earlier this year but warned demand could fall as recessions set in throughout the world.

In New Mexico, companies continued to drill despite slumping prices, the report read, increasing production each month to offset losses in tax revenue tied to reduce price points.

 “As a recession begins in many parts of the world, expectations for global oil demand have fallen, bringing energy prices with it,” read the report. “Despite the lower prices, energy companies in New Mexico have continued to drill at production expanding rates, as well as increasing the productivity per well, breaking production records each month.”

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