US OIL MAJORS STILL HAVE BIG PLANS FOR PERMIAN BASIN
According to Investor’s Business Daily, US Oil Majors have big plans for Permian Basin even if they are under pressure to control costs as the Energy Information Administration (EIA) sees oil prices averaging $56 per barrel in 2020.
“But that doesn’t mean that they won’t at least go window shopping for prime assets in the prolific basin as they try to reach lofty goals” said the analyst Gillian Rich.
Chevron wants to produce 600,000 barrels per day in the basin by the end of 2020 and 900,000 bpd in 2023. Exxon Mobil plans to produce 1 million barrels per day in the Permian Basin as early as 2024.
Those targets represent massive increases from current levels that can’t just come from improvements in technology and completion techniques. Acquisitions will be needed. In Q3, Chevron’s Permian Basin production jumped 35% year over year to 455,000 bpd. Exxon’s output there soared 70% to 293,000 barrels.
“They are always going to be looking, especially for assets in the Permian,” said Edward Jones’ analyst Jennifer Rowland. “We’ve seen a lot of asset swapping and picking up of additional acreage, so you could see more of that in an environment where growth is not being rewarded.”
The Permian Basin is a shale basin about 250 miles wide and 300 miles long, spanning parts of west Texas and southeastern New Mexico. It includes the highly-prolific Delaware and Midland sub-basins.
Chevron said that “the Permian Basin is an energy power house”. The company is one of the largest producers of oil and natural gas in the Permian with holdings totaling about 2.2 million net acres. In 2018, Chevron’s production in the Permian increased 71 percent and forecasts call for continued double-digit growth. From 2015 to 2018, development and production costs decreased by about 40 percent and well performance continues to improve.
(Source: Investor’s Business Daily/Chevron – Image: Western Permian Basin/USGS)