GAS & OIL SHALE/RESOURCE PLAYS FACTBOOK
NGI
GULF COAST
PERMIAN BASIN
What a difference higher crude oil prices
can make. One of NGI’s analysts remembers
an early 1999 business trip he took to the
oil focused Permian Basin. “Crude oil prices
were less than $20 per barrel back then, and
this one town we visited was practically all
boarded up. We stopped to ask a woman at
a gas station where there was a good place
to eat in town. She said about the only place
still open was an Outback Steakhouse along
the highway. When we said that sounded
good, she screamed, ‘Wow, y’all must be
rich!’”
Fast forward to 2014, when the fortunes of
many in the Permian Basin have taken a dramatic turn for the better, thanks in no small part to WTI prices that have
surpassed $90 per barrel. Between 2005-2012, the overall drilling rig count and permits issued on the Texas side of the
Permian grew at respective trend-line growth rates of 16% and 11% per year. Not bad for a “mature” play that first began
producing more than 90 years ago.
Two things stand out in the graph to
the right, all that permitting activity
has led to a significant increase in oil
production in the area, with monthly
Permian crude production across
Texas and New Mexico rising from
843,000 barrels per day in January
2008 to an estimated 1,335,000 barrels per day by January 2014. While
the pace of growth has declined since
mid-2012, leading to flattish monthly
production totals in the second half
of 2013, we believe this is mostly the
result of a lack of infrastructure and
takeaway capacity, particularly in some
of the more emerging portions of
the play. We believe there is another
1,600,000 barrels per day of crude
oil capacity slated to come on line by
the end of 2015, including 700,000
barrels per day of additional capacity
announced by Plains All-American in
early December 2013.
Two things stand out in the graph
below that underscore the renewed
interest in the Permian these days.
One is that the Permian continues
to account for a greater percentage
of drilling activity in the U.S. In
February 2011, the Permian claimed 21.7% of the total working rigs in the United States. That figure climbed to 26.8%
as of December 13, 2013. The other, which we believe represents an important secular change, is that horizontal and
directional drilling are becoming far more prevalent in the region. More traditional, vertical rigs represented 80% of the
rigs in the Permian in February 2011, but that figure was down to just 49% in December 2013.
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GULF COAST
NGI
GAS & OIL SHALE/RESOURCE PLAYS FACTBOOK
Permian Basin (continued)
So why the big change? Certainly higher oil prices have played a big role, as previously mentioned. But the other main
reason is that unconventional formations are quickly rising to prominence in the Permian, and that is attracting more
investment capital to the region. Moreover, many counties in the Permian are underlain by several “stacked” formations
that not only offer more potential reserves over the same acreage, but also improve well economics because operators
can target multiple pay zones with the same well bore. For example, the Midland Basin is being actively drilled for
both the Wolfcamp and Spraberry formations, while the Delaware Basin features the Wolfcamp and the Bone Springs
intervals. We summarize the more prominent resource plays within the Permian in the following table:
Resource Play
Abo Formation
Type/Primary Target
Tight Sands – Oil
Location
NM, W. TX
Sub-Basin
Northwestern Shelf
Avalon Shale
Shale – Gas
NM, W. TX
Delaware
Bone Springs (2nd & 3rd)
Tight Sands – Oil
NM, W. TX
Delaware
Cline Shale
Shale – Oil
W. TX
Midland, Eastern Shelf
Spraberry
Tight Sands – Oil
W. TX
Midland
Wolfberry
Shale/Tight Sands – Oil
W. TX
Midland
Wolfbone
Shale/Tight Sands – Oil
W. TX
Delaware
Wolfcamp Shale
Shale – Oil
NM, W. TX
Delaware, Midland
Yeso Formation
Carbonate – Oil
NM
Northwestern Shelf
As alluded to above, the Permian basin can be broken down into a series of “sub-basins,” including (moving generally
from west to east) the Northern portion of the Delaware Basin and the Northwestern Shelf in New Mexico, and
the Southern portion of the Delaware Basin, the Central Basin Platform, the Midland Basin, and the Eastern Shelf
in Texas. Most of the unconventional activity to date within the Permian has been focused within the Midland and
Delaware Basins, with a good amount of activity in the Abo/Yeso intervals in the Northwestern Shelf as well.
Noticeably absent from the surge in unconventional drilling is the Central Basin Platform (CBP), which we believe
tends to feature more conventional formations and waterflood & CO2 operations. However, that is not to say that the
CBP does not play a major role in the Permian. As shown in the map below, the CBP contains Andrews, Ector, and
Gaines Counties, TX, three of the most prolific crude producing counties in the Permian. The Wolfcamp Shale underlies the CBP, so there is some potential unconventional upside to this area as well.
Occidental Petroleum is easily the largest oil producer on the Texas side of the Permian, producing more than twice the
amount of #2 Pioneer Natural Resources in 2012. Rounding out the top 5 are Apache Corporation, Kinder Morgan
Production Co., and ExxonMobil/XTO Energy.
There appears to be some disagreement among several prominent sources as to which counties should be included in
the Permian Basin. The Railroad Commission of Texas (RRC) includes all counties within its Districts 7C, 8, and 8A
in the varying production and other operating statistics that appear on the Permian Basin portion of its webpage, yet it
includes a different slate of counties in its official definition of the play on that same site. The U.S. Energy Information
Administration assumes its own mix of counties in its production estimate of the play, and the Permian Basin Coalition
uses a slightly different combination as well. We summarize these variances in the following table.
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GAS & OIL SHALE/RESOURCE PLAYS FACTBOOK
GULF COAST
Permian Basin (continued)
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GULF COAST
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GAS & OIL SHALE/RESOURCE PLAYS FACTBOOK
Permian Basin (continued)
Counties
Our definition of the Permian includes all counties identified by the Texas Railroad Commission, EIA, and Permian
Basin Coalition as being prospective for the Permian that had any actual crude oil production through the first 10
months of 2013. NOTE: this list includes counties whose production rounded to 0.0 in the “Estimated Cumulative
Jan-Oct 2013 Permian Basin Crude Oil Production By County” chart above.
Texas: Andrews, Borden, Cochran, Coke, Concho, Cottle, Crane, Crockett, Crosby, Culberson, Dawson, Dickens,
Ector, Edwards, Floyd, Gaines, Garza, Glasscock, Hale, Hockley, Howard, Irion, Kent, Kimble, King, Knox, Lamb,
Loving, Lubbock, Lynn, Martin, McColluch, Menard, Midland, Mitchell, Motley, Nolan, Pecos, Reagan, Reeves,
Runnels, Schleicher, Scurry, Sterling, Stonewall, Sutton, Taylor, Terrell, Terry, Tom Green, Upton, Val Verde, Ward,
Winkler, Yoakum
New Mexico: Chaves, Eddy, Lea, Roosevelt
Permian NatGas Pipelines
Atmos, El Paso, Energy Transfer, Enterprise Texas Pipeline, KM Texas, NGPL, Northern Natural, Oneok Westex
Transmission, Transwestern, Waha Hub
Permian Net Acreage Positions
Last Updated December 2013
Company
Net Acres
Company
Occidental Petroleum
1,745,000
Quicksilver Resources
26,250
Apache*
1,600,000
Resolute Energy
24,800
Chevron
1,500,000
Chaparral Energy
19,000
Devon Energy
1,300,000
Eagle Rock Energy Partners*
16,090
ConocoPhillips
1,100,000
Sandridge
15,500
Pioneer Resources
640,000
Three Rivers Natural Resource Holdings II
15,000
Concho Resources
630,000
EV Energy Partners
11,778
Shell
618,000
Caza Oil & Gas
3,312
Cimarex
437,693
Big Sky Petroleum
2,300
BHP Billiton
433,000
PetroQuest
1,600
ExxonMobil
400,000
Adams Resources Exploration
N/A
Anadarko Petroleum
330,000
Bopco LP
N/A
EOG Resources
320,000
Citation Oil & Gas
N/A
Energen
300,000
Endeavor Energy Resources
N/A
Clayton Williams
170,000
Fasken Oil & Ranch
N/A
FireWheel Energy LLC
150,000
Field Point Petroleum
N/A
Approach Resources
148,000
Halcon Resources
N/A
EP Energy
138,130
Henry Resources
N/A
Whiting Petroleum
128,317
Hess
N/A
Linn Energy
104,000
JM Cox Resources
N/A
Broad Oak Energy
65,000
LCX Energy
N/A
Diamondback Energy
65,000
Legacy Resources
N/A
Forest Oil
63,500
Lynden Energy
N/A
Vanguard Natural Resources*
61,415
Mewbourne Oil
N/A
Berry Petroleum
60,000
Parallel Petroleum
N/A
CrownQuest
60,000
Richland Resources
N/A
EXCO Resources
46,712
Sheridan Production Partners II
N/A
1
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Net Acres
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GAS & OIL SHALE/RESOURCE PLAYS FACTBOOK
Permian Net Acreage Positions
Last Updated December 2013
Company
Company
Net Acres
Abraxas Petroleum
Net Acres
42,092
SM Energy
N/A
Callon Petroleum
32,600
Statoil
N/A
30,900
Summit Energy
N/A
W&T Offshore
Range Resources
30,000
U.S. Energy
N/A
Antares Energy
29,880
Unit Petroleum
N/A
ENI
26,250
Yates Petroleum
N/A
2
In a March 2011 investor presentation, Occidental Petroleum notes that there are more than 1,500 operators in the Permian basin.
*Estimate
1
Pro forma for East Goldsmith acquisition
2
Assumes successful sale of 70,000 acres announced 12/3/2013
GULF COAST
Permian Basin (continued)
Source: Compiled by NGI’s Shale Daily from company documents
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