Wednesday, July 16, 2014

A Technological Shift Could Unlock A New Oil Boom In The Permian Basin

Much larger than Eagle Ford and once thought to have reached peak production, new technology has brought us full circle back to the Permian Basin in Texas and New Mexico, where the recent shift to horizontal well drilling has rendered this play the unexpected ground zero. Determining where the next real oil boom will be depends largely on following the technology, and while the Permian Basin has been slower than others to switch from vertical to horizontal well drilling, horizontal has now outpaced vertical, and investors are lining up to get in on the game. Until about 12 years ago, virtually all wells in the Permian were vertical. As of last fall, however, horizontal and directional rig counts — meaning, non-vertical drilling rigs — have now begun to exceed vertical, according to RBN Energy. But what they’re also looking for are developers who are seeing strong economics in both vertical and horizontal wells. It’s all about balance, and this co-mingling of multiple zones — with the ability to complete both horizontal and vertical wells economically — is the best bet for investors. The Permian Basin now boasts the largest rig count in the U.S. Just this week, the number of rigs exploring for oil and natural gas in the Permian Basin increased to 560, according to the weekly rig count report released July 10 by Houston-based oilfield services company Baker Hughes. What’s more, according to Bernstein Research, the Permian Basin will top the charts for North American spending growth in 2014, with an amazing 21 percent increase. And 2013 was already a stellar year for the Permian. Permian production last year increased by 280,000 boe/d to 2.3 million boe/d, comprised of 1.4 million b/d of oil and 5.3 bcfd of gas, according to the U.S. Energy Information Administration. This technology has changed the way we think about the Permian Basin, once the darling of American oil production that became lost in the shadow of Eagle Ford and Bakken. While Eagle Ford and Bakken were viewed as the “bigger plays” at the start of the unconventional boom in the U.S., due to the fact that new technology debuted here harder and faster, the Permian is back and bigger than ever...more
“The Permian Basin is much larger than the Eagle Ford play, and it also contains over 20 potentially productive zones, while Eagle Ford has only one zone,” Parker Hallam, CEO of Crude Energy — a small-cap company, not publicly traded, operating in the Permian, told Oilprice.com.

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