Permian Total hydrocarbon production in the Delaware Basin, Permian’s top-producing sport, will average a record 5.7 million barrels of oil equivalent daily (boepd) in 2022, according to Rystad Energy research. Due to high oil prices and attractive economy, total production will increase by about 990,000 boepd, of which about half – 433,000 boepd – new oil production.
Investments in the basin are also expected to jump, rising more than 40% from the 2021 level to $ 25.7 billion this year. Significant contributors to this growth are the majors – ExxonMobil, Chevron, BP and ConocoPhillips – which last year reduced their investment in Permian Delaware by 33% compared to 2020. This year, large companies are expected to increase their total investment in the Basin by 60% to a total of $ 7.4 billion. Shares of private operators are also set to balloon in 2022, rising 50% from 8 5.8 billion in 2021 to about 9 9 billion in 2022. In terms of services, inflation is expected to be between 10% and 15% this year. Contributing to higher spending levels.
Operator-specific results are based on research by Rystad Energy, a group of 61 operator equivalents in the basin. The forecasts are based on a scenario where West Texas Intermediate (WTI) oil futures averaged 10 106 a barrel in 2022, down to 70 70 a barrel next year and 50 50 a barrel in 2025.
“Permian Delaware has emerged as the top oil producer in the U.S. shale patch, surpassing the growth of other oil-rich regions. With oil prices expected to rise, 2022 promises to be another outstanding year for growth in the region, “said Veronica Meyer, vice president of Rested Energy.
Private operators will be a significant driver of record growth as they respond quickly to improved markets, increase activity and output. Private companies have more than doubled their combined rig counts in the basin, rising from 30 to 73 in one year between January 2021 and April 2022. Private players are also less focused on better optimization and environmental objectives than their public partners – such as cutting flare-ups – which has emerged as a significant play-level trend in recent years.
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This increase in production may seem like a response to the US government’s call for increased supply, but most drilling and capital expansion has already been carried out by companies in late 2021, before the Russian invasion of Ukraine. Public operators are reluctant to pursue higher productivity growth and focus on capital discipline in the face of cost inflation and labor and equipment shortages.
Private operators are making significant contributions to the drilling activity in the play. The total number of spawned wells increased by 33% last year, with private operators making up 46% of the total. The coupe count is projected to grow a further 32% in 2022, and based on current activity levels, private players could contribute about 43% this year. However, their contribution is expected to decline by 2030, as many of these companies are in relatively small acreage positions and, as a result, operations may begin to run out at current speeds.
The majors, especially those powered by ExxonMobil, are also actively expanding their drilling efforts in 2022. The peer group is expected to increase drilling by 60% this year and contribute about 20% to the total activity of the play, up from 17% last year.
The game of Permian Delaware extends to Leah and Eddie County in southeastern New Mexico and West Texas County. Delaware’s western sub-basin, including Colberson and Western Reeves Counties, has higher gas levels. Estimated final recovery rates (EUR) – the amount of potential reserve hydrocarbons in a given reserve or well – may be comparatively higher in this region, helping to explain a temporary shift in activity of various producers towards the Gasier region in 2020, when oil prices were in their infancy. While plantings are actively developing in Texas and New Mexico, New Mexico has gained momentum over the past few years, with companies that hold monopolies in the state growing rapidly.
Prior to 2014 basin activity was primarily influenced by vertical drilling, but the share of horizontal drilling has grown rapidly, accelerating growth. Production additions in 2019 reached about 1.2 million boepd per year. Even when the Covid-19 epidemic hit the shell industry, Permian Delaware increased by 300,000 to 400,000 boepd in 2020 and 2021.
However, the dynamics of the play’s production have changed since the pre-Covid-19 era. Prior to 2020, large companies largely focused on growth trends – ExxonMobil, Chevron and BP – and other public companies focused on meeting their aggressive manufacturing growth targets and investing in cash flows. At the moment, public players are maintaining capital discipline, and prioritizing shareholder returns while keeping the reinvestment rate between 30% and 40%. Higher oil prices have encouraged several large producers, such as EOG Resources and Occidental Petroleum, to increase their activity since the fourth quarter of last year and still meet their reinvestment objectives. Nonetheless, private operators have increased the game since the beginning of last year, responding quickly to higher oil prices. The Maybourne Oil Company, which focuses on one-way development in New Mexico, now operates 16 rigs in Delaware, second only to the EOG, when Tap Rock Resources ranked the top five drillers in the play with a stable seven rig count.
By the power of Rystad
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