Download now: Cannabis Cash

Permian Basin Sparks Oil Revival

The Texas Oil Showdown

Written by Keith Kohl
Posted July 19, 2013

Every cent of the vast oil fortunes made in West Texas over the last 92 years have Mitchell County to thank.

A single discovery well drilled into the Westbrook Field in Mitchell back in 1921 is what kick-started oil production in the Permian Basin.

After drilling nearly 2,500 feet into the ground, the first commercial well had been placed into production. And in the decades that followed, the Permian Basin carved its place as one of the strongest oil-producing areas in the United States.

We don't call the global oil benchmark "East Texas Intermediate," after all...

But contrary to popular belief, oil companies in West Texas haven't always enjoyed boom times.

Some of my seasoned readers might remember the oil glut in the 1980s that resulted from lower demand and increased production following the tumultuous energy crisis in the late 1970s.

This also led to a considerable bust in oil activity in the Permian Basin.

Of course, production across Texas by then had already started its long, slow decline. The state's field output had fallen more over 660,000 barrels between 1981 and 1989.

Well, dear reader, I'm happy to tell you the good times are rolling for West Texas once more.

Witnessing an Oil Revival

If this is your first foray into the Permian Basin, let's get you up to speed right away.

The area is roughly 250 miles wide and 300 miles long, and covers approximately 59 Texas counties.

permian map 7-18

Ever since the first well in Mitchell County started flowing, almost 29 billion barrels of crude have been extracted from fields within the Permian Basin.

And in spite of having pulled that much oil out of the ground, the entire area is still undergoing a resurgence in oil and gas production. At last count, the Railroad Commission of Texas had tagged more than 7,000 fields within the area.

But the oil companies in the Permian still have a lot of drilling ahead of them if they have any hope of overtaking previous production records.

In 1966, for example, approximately 607 million barrels of oil was produced. Last year, it was just 312 million barrels — which means drillers have officially reversed the decades-long decline.

permian output 7-18

This oil revival is also leading up to a serious crude showdown with another top oil-producing state...

Head-to-Head Shale Showdown

Over the last few days, I've been reading and talking about U.S. production at length, and one news story has been sent my way more than any other: that North Dakota oil production topped 800,000 barrels per day.

Now, I'm not trying to downplay the magnitude of this news. But I'll admit that I'm not surprised.

In fact, we should all get used to seeing these kinds of headlines, because I personally think 800,000 barrels per day isn't close to the production rates we're going to see coming out of the Bakken...

Even the North Dakota Industrial Commission noted that May was a particularly wet month for the area, which probably disrupted some of the drilling and completing operations.

Let me be clear here: 810,129 barrels per day isn't a barrier — it's a beginning.

By the end of next year, I won't be surprised when North Dakota's oil output tops a million barrels per day.

Now, I'm not making some wild prediction here. I'm expecting it.

So, who are you rooting for to take the crown for state oil production: Texas or North Dakota?

I suppose we should be backing both — because there's only one guaranteed winner in all of this, and that's us.

Up in the Midwest, we've seen undervalued Bakken stocks experience considerable growth across the board over the last five years.

Then again, it isn't easy taking on the undisputed king of U.S. oil production.

If nothing else holds true, it's that Texas has more than one good hand when it comes to successful oil plays. Among them, Texas oil companies have managed to boost crude production back over two million barrels per day in 2012. And these guys are far from done.

So while North Dakota floods the mainstream media headlines, people haven't been paying attention to the fact that the Lone Star State has already increased production to 2.4 million barrels per day in April.

Think about that for just a second...

One look at Texas' monthly production figures reveals the state has increased its own oil output by over 400,000 barrels per day — fully one-half of North Dakota's daily rate — in less than 10 months.

We plan to take full advantage of this explosive situation, which is why I'm putting the final touches on my latest report...

It highlights several new opportunities opening up for investors.

You'll have the full details on this Texas oil revival very soon.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.


Elon Musk's Lithium Revolution is Upon Us

Question of the Day

Which industry in California is responsible for the most energy usage?