Drillers in the Permian Basin get ready to ramp up activities

Monday, 09 May 2022
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More than 900 drilling permits for new horizontal wells have recently been awarded in the Permian Basin, spurred by high oil prices. “This is a clear signal that operators in the basin are kicking into high gear on their development plans, positioning for a significant ramp-up and an acceleration in the speed of output expansion over the next few months once supply chain bottlenecks ease,” Rystad Energy commented.

The Permian Basin, which spans western Texas and eastern New Mexico, represents the most prolific hydrocarbon production region in the United States. They accounted for about 30 percent of US crude oil production and 14 percent of US natural gas output measured as gross withdrawals. The Delaware Basin and Midland Basin are parts of the greater Permian Basin and contain multiple stacked reservoirs.

“The surge in permitting activity positions the industry for continuous rig count additions in the second half of 2022 and foreshadows a significant increase in supply capacity from early 2023,” said Artem Abramov, Rystad Energy’s head of shale research. “However, it is advisable to practice caution when using these numbers as a concrete indicator of future drilling plans,” he warned.

Another indication that the increase in permit activity is structural is the number of permits obtained by the largest contributors to Permian drilling in March relative to their typical monthly counts over the last 12 months. “As many as 10 of the 22 largest contributors saw higher activity in March than their maximum monthly count between March 2021 and February 2022,” the Rystad Energy report reads.

“Pioneer Natural Resources stood out, with 99 horizontal permits approved in March – a record high for the operator’s portfolio on a pro-forma current operatorship basis,” it explained. “Diamondback Energy was another public producer with unusually high activity in March, at 59, while Franklin Mountain Energy, Birch Resources and Spur Energy Partners were the most significant among private operators in terms of the number of permits in March relative to the average rate in the previous 12 months,” it said.

As many as 81 unique operators got at least one new horizontal drill permit approved in the Permian last month, a record-high number of active operators, and a significant increase from the typical level of around 60 active operators per month observed in the second half of last year.

“Other major oil regions outside of the Permian – the Bakken, Eagle Ford and Niobrara combined – also delivered a healthy uptick, with 61 unique operators getting new permits in March,” it said, specifying: “The Eagle Ford in South Texas contributed the most to this activity expansion.” 

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