Permian Sweet Spots | Russell T. Rudy Energy LLC
The Permian Basin has long been considered one of three biggest shale plays in the U. S., along with the Bakken in North Dakota and the Eagle Ford in South Texas. It now dominates the domestic rig count with more active rigs than the other major shale plays combined. A recent article in “Oil Voice” uses analysis by Rystad Energy to explain why the Permian is now considered the sweetest of the sweet spots.
Two major areas dominate the activity in the Permian: the Midland Basin and the Delaware Basin. Each has its own specific characteristics and economics. The Midland Basin is centered around Midland and Martin counties in West Texas, and runs roughly North and South. The Delaware Basin is further to the west and is clustered around Reeves and Culberson counties in Texas, and Eddy and Lea counties in Southeast New Mexico. In both basins, costs per barrel of oil equivalent (boe) have been continually decreasing since 2014. This is the result of lower unit well costs and increasing estimated ultimate recoveries (EUR) per well. More tightly clustered wells, increased proppant and fracking fluid per completion stage, and longer later segments per well, have all contributed to this enhanced performance.
Overall, the Delaware Basin enjoys an edge in terms of lower cost per boe, with Culberson County leading the way. While economics vary by areas within each basin, the core areas of both are very attractive at current prices. The new wells in the Bone Springs play in the Delaware Basin break-even at $40/barrel. Concho, Devon and EOG are all aggressively exploiting this opportunity.
In the Midland Basin, the Sprayberry formation is the most lucrative target and wells in Midland and Martin counties break even at $47 on average. However, economics vary significantly by area and operator. Pioneer and Diamondback are drilling wells in Martin County that break-even at $37.
While activity has stagnated in most shale plays, it is easy to understand why the Permian Basin is still going strong.
To read the article, which includes some very good graphs, in its entirety, please go to http://www.oilvoice.com/n/Permian-sweet-spots-are-getting-sweeter-Learn-where-they-are/ca61ff0c18b6.aspx .
