Permian Basin Crude Oil Investing

Brian Hicks

Written By Brian Hicks

Posted September 23, 2013

The Permian Basin is often overlooked by its brother to the south. The Eagle Ford gets all the accolades for reviving the Texas oil industry, but we shouldn’t be so hasty.

drill rigIt’s true that the Eagle Ford has taken off as major production has been lifted by fracking, but to the west, the Permian Basin has quietly started to out-produce the Eagle Ford with the same technology.

In the first half of this year, the Permian Basin already surpassed the Eagle Ford in oil production with about 890,000 barrels per day (bpd) compared to just under 600,000 barrels.

By the close of 2013, according to Rigzone, output from the Permian Basin will reach 1.4 million bpd, while the Eagle Ford won’t crack 1 million barrels until mid-2014.

Now, that’s not to say the Eagle Ford is slowing down; it’s just that the Permian Basin is on a rampage and getting stronger every day.

And it’s not that places like the Eagle Ford or even the Bakken are losing steam – it’s just that the Permian Basin is taking over. But the Eagle Ford is also projected to produce even more than the Bakken by this time next year.

Topped Off

What’s really important to remember is that you’re likely to find the same players in the Permian Basin that you find working in the Eagle Ford. And we will see an explosion of growth in the Permian basin in the next ten years.

The whole bigger, stronger, faster routine is going into effect. Drilling is becoming more efficient, and overall, production is happening faster.

If you walk into the Permian Basin right now, most of the 450 rigs you’re going to find are vertical. The region has been slow to adopt horizontal drilling. But now that it has, there’s no looking back. The 50 or so horizontal rigs that will come online each year over that next several years will show the most promise. That’s where Wall Street gets giddy.

These rigs will produce like nothing we’ve ever seen before.

Revving Up

A lot of work is being done by independent companies who are drilling with the kind of tenacity that is sure to catch fire. Once the major companies do the same, this place will really take off.

One of the Permian Basin’s top producers today, according to Houston Business Journal, is Texas-based Pioneer Natural Resources (NYSE: PXD), with more than 12 million barrels of oil produced in the first half of the year.

The Wolfcamp and Bone Spring plays will push growth even further, pumping upwards of 40 percent of the region’s oil by 2018, according to OA Online. Capital in the basin will grow by about 57 percent, or $22 billion, in that time, most of which will come from the oil giants getting their whistles wet.

Pay Day

Not only is the Permian Basin set to run Texas oil production, but it’s supposed to reach 2 million bpd in the next five years.

And while other shale plays peak at about 200 horizontal rigs because of overcrowding, that’s not an issue in the Permian Basin. Its geography keeps it wide open for development.

Investors in general have turned an eye to exploration and production companies in the oil industry, so you’ve got to take a serious look at anybody who is operating in the Permian Basin. This thing is going to be BIG.

There’s room for all of us to fill our pockets if we want to. The one thing that could get in the way is infrastructure that can’t support the rapid growth, but even that is changing. There are a bunch of projects rolling out to keep this thing going strong for a long time.


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