Oil & Gas News

Permian Production Dips, Projections Show Growth is Coming

Permian, Rig Count

By: Carlsbad Current-Argus – Oil and gas operations in the Permian Basin continued to decline this week, signaling American supplies were meeting demand and production could continue to dip.

The basin shared by southeast New Mexico and West Texas did remain the U.S.’ most productive, even as it was forecast to drop by 26,000 barrels of crude oil per day (bpd) for a total of about 5.8 million bpd in October, according to the Energy Information Administration (EIA).

That was the largest decline predicted by the EIA next month among U.S. onshore shale regions, with the Eagle Ford predicted to see the second-largest decline at 17,000 bpd down in October.

The Permian was expected to grow in natural gas production by 11 million cubic feet per day, the EIA reported to 23.7 billion cf/d next month – the second most in the U.S.

These declines were also reflected to oil and gas rigs, as the Permian Basin dropped five rigs in the last week as of Friday, Baker Hughes reported, for its total of 317 rigs.

Texas was down five rigs for its total of 312, records show, while New Mexico dropped two rigs for a total of 100 as of Friday, records show.

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New Mexico and Texas had the second and first-highest rig counts in the U.S., Baker Hughes reported, with Louisiana third at 42 rigs, Oklahoma fourth with 37 rigs, and North Dakota fifth at 30 rigs.

The drop in U.S. oil production, led by the Permian Basin, led to higher oil prices, as the U.S. saw some of its highest prices of the year.

Oil was trading at about $90 a barrel on Monday morning, according to the Chicago Mercantile Exchange, amid a gradual uptick from the lowest price of the year at $67 a barrel reported June 27 by Nasdaq.

Energy companies sought to enter the Permian Basin as its fossil fuel operations fluctuated, hoping to capitalize on future market upswings in the nation-leading region.

The latest, Momentum Minerals said Sept. 18 it closed on the sale of about 2,101 acres spread across 10 counties in the Permian – about 1,587 in the eastern Midland sub-basin and 514 acres in the western Delaware sub-basin along the New Mexico-Texas border.

The lands were sold to Momentum from Post Oak Legacy Assets.

“It was a pleasure working with the Post Oak team on this strategic and accretive addition to our growing portfolio,” said Momentum Co-CEO James Elder.

Mineral RightsOver the next five years, capital spending by oil and gas companies in the U.S. was expected to climb to $980 million, according to a Sept. 21 report from Mordor Intelligence, as supplies are maintained to meet demand.

Capital expenditures (CAPEX) means the funds companies spend to acquire, upgrade, or maintain physical assets.

In 2023, Mordor estimated the market was at about $797.6 billion in CAPEX.

This increase in investment was believed driven by a multi-year recovery from the COVID-19 pandemic.

“Investment in the upstream oil and gas industry grew after the rise in oil and gas demand amid the opening of the COVID-19 lockdowns,” the report read. “An expansion in demand recovered crude oil prices in 2022.”

This came as the U.S. was expected to cover about 60 percent of the world’s oil demand “in the coming years,” read the report, while the country accounts for about 70 percent of total investments in North America.

During 2023 to 2028, the report estimated 80 percent of upstream capital projects in country were new builds, while 20 percent were expansions of existing infrastructure.

“The United States has always been at the forefront in the past and is also expected to dominate the region’s oil and gas CAPEX market in the forecast period,” read the report.

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