Rigs don't matter: a 2019 Permian output surge may impact oil prices -- Rigzone contributor. One would think a story of a Permian output surge would be preceded by a story of a surge in turning bits. But not to be. Rigs were reported to be down last week -- by a whopping four rigs in Texas, as just one example. From Rigzone, datapoints:
- Permian pipeline capacity surging (see RBN Energy story below, also)
- Permian pipeline capacity to jump by 1.5 million bbls to 2.0 million bbls -- that's as much oil as North Dakota produces daily
- constraints may moderate production
- price of WTI
- flaring
- Also, shift from trucking and CBR
- this is most interesting: DUCs --
There are also constraints on how quickly production can increase. The large and growing number of unproductive wells (DUCs) in the Permian suggests that new pipeline capacity, allowing for higher wellhead prices, will see a surge in well fracking/completions, depending on the availability of crews.
Historically, the number of wells fracked in a given month in the Permian has been as high as 668 (October 2014) versus a recent level of 530, and the rate has increased as much as 20-30/month, sometimes much higher. It seems unlikely that the number of fracked wells can increase by more than 50/month, but since the typical well adds about 600-700 b/d of gross output, the implication is that Permian output could grow by an additional 30 tb/d per month, or 360 tb/d by December 2020 versus the year earlier amount. This amount is probably incremental to existing projections.
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Back to the Bakken
Wells coming off the confidential list over the weekend, today -- Monday, August 26, 2019: 73 for the month; 120 for the quarter:
- 34758, PNC, MRO, Tercek 14-24H, Chimney Butte,
- 34639, SI/NC, Slawson, Wolverine Federal 12-31-30TF2H, Elm Tree, no production data,
- 35975, SI/NC, Newfield, Sturgeon 150-99-18-19-4H, South Tobacco Garden, no production data,
- 35629, 755, Petro-Hunt, Zabolotny 144-98-3B-10-3H, Little Knife, t7/19; cum 7K over 11 days;
- 34714, 320, Oasis, Nordeng 5298 12-25W 2T, Banks, t3/19; cum 96K 6/19;
- 34713, 725, Oasis, Nordeng 5298 12-25W 3B, Banks, t3/19; cum 132K 6/19;
- 34301, drl, XTO, Rough Federal 44X-23H, North Fork,
- 34172, 2,791, CLR, Ravin 4-1H, Dimmick Lake, t6/19; cum 8K 6/19; 6K over three days extrapolates to 58,290 bbls/
- 34034, 153, Petro Harvester Operating Company, LLC, FLX3 21-16 163-91 D, Portal, t5/19; cum 8K over a full two months;
- 35041, drl, Hess, BB-Charlie Loomer-150-95-0718H-8, Blue Buttes,
- 24019, SI/NC, Slawson, Wolverine Federal 6-31-30TFH, Elm Tree, no production data,
| $54.70 | 8/26/2019 | 08/26/2018 | 08/26/2017 | 08/26/2016 | 08/26/2015 |
|---|---|---|---|---|---|
| Active Rigs | 64 | 62 | 55 | 30 | 75 |
RBN Energy: the tough reality of a committed crude pipeline shipper. Archived.
Crude oil pipeline shippers across the U.S., and especially in the Permian, are about to experience something they haven’t seen in a few years: a bunch of new crude takeaway capacity with lower-cost tariffs coming online, and the sudden need among committed shippers to fill their pipe space. This also affects some folks committed to space on older pipelines, whose higher-cost tariffs could leave them out of the money. The start-up of pipelines like Plains All American’s Cactus II, with a super-low $1.05/bbl tariff — and several pipelines in other basins lowering tariffs — has traders with pipeline commitments old and new re-running their economics and trying to determine their best strategy moving forward. Some may be forced to move volume at a loss. Today, we analyze the recent trend in tariff compression and how traders deal with uneconomical take-or-pay contracts.
We are witnessing a dramatic change in the cost to ship crude oil across the U.S. — particularly between West Texas and the Gulf Coast. Previously, pipelines in the area were charging committed shippers well over $2/bbl to transport crude from key Permian hubs like Midland, Crane or Colorado City, TX, to the coast (think the BridgeTex or Longhorn pipelines, among others). Uncommitted rates were north of $4-$5/bbl. Those rates had seemed reasonable, especially when takeaway capacity was constrained and spreads between West Texas and the Gulf Coast or Cushing were far higher — in some cases $15-$20/bbl or more. But as new pipeline capacity out of the Permian has been built out, operators have been offering lower tariff rates in an effort to entice new shippers to (a) commit to their pipeline, and (b) gobble up any uncommitted capacity that may be left unused.
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