Random Feel-Good Story Out of the Permian

West Texas.

The Street Authority Network is reporting:

It's a madhouse," said J.E. Wolf III in a recent Bloomberg article. "I've been selling real estate here for 43 years, and I've never seen it like this."

Teenagers fresh out of high school are earning $75,000 annually driving trucks.
Locals have to postpone weddings because there are not enough hotel rooms available for guests. And when they are available, a room you might expect to run you $50 is going for $300 a night.

Welcome to Midland, Texas -- also known to some as "Boomtown USA."

Midland was the fastest-growing metropolitan area in the United States in 2012, according to the U.S. Census Bureau. The total unemployment rate for the town is 3.3%, which is less than half the national average of 7.7%.

And then this:

In fact, the number of permits issued in Midland County has soared 200% since 2009 -- totaling more than 1,050 in 2012. As more of these new wells begin production, the potential for profit is enormous.

This is a trend we've seen play out before. Nathan Slaughter, StreetAuthority's expert resource analyst, has been covering the boom in North Dakota's Bakken Shale for years. Two big players in this region, Whiting Petroleum  and Heckmann Corp., are featured in the real-money portfolio of his Scarcity and Real Wealth newsletter.

Yet, unlike the more established Bakken Shale play, energy production from horizontal drilling and fracking activities in the Permian is still relatively new.

Ed Parker is a regional sales manager for Goliath Industries, a company that furnishes housing for oilfield workers. He recently compared the two plays in the Fort Worth Star-Telegram:

"The Permian is about a year and a half behind North Dakota. We're on the front edge of the boom," said Parker.

Holy mackerel: a year and a half behind North Dakota. And this is the Permian. An old, old oil field. It was big in 1928. And now, starting all over again.

************************* 

And, again, the disclaimer: this is not an investment site. I left in the investment references simply for continuity. Do not make any investment decisions based on what you read here, or what you think you read here. 

*************************

From the Texas State Historical Association:

Much of the Permian Basin was home to the Comanche Indians until they were finally forced out by the United States Army in 1875. Because of good grasslands, most of the area was inviting to both ranchers and farmers.

Since surface water was almost nonexistent, ranchers and farmers drilled water wells to sustain themselves and their livestock, and they often found evidence of oil or gas.

The first commercial oil well in the Permian Basin was completed in 1921 in Mitchell County, on the east side of the basin; completed at a total depth of 2,498 feet, it was the discovery well of the Westbrook field.

Early oil prospecting was started in southeastern New Mexico about the same time as in West Texas. By 1923 it was presumed that the Permian Basin was in the form of an elliptical bowl, the subsurface strata dipping from the rim to a maximum depth in the middle. Because of this and the lack of suitable rock outcrops in the interior during the early search for oil, geological survey crews looked for surface anticlines in the Edwards Plateau and the rock outcrop areas west and south of the Pecos River.

This method resulted in the discovery of several good oilfields, notably the World field in Crockett County, the McCamey field in Upton and Crane counties (1925), and the Yates oilfield in Pecos County (1926). Prior to the Hobbs field discovery in 1928, all discoveries were made as a result of random drilling or surface and subsurface mapping.

The Hobbs field discovery was made after magnetometer and torsion balance surveys both showed the area to be anomalous. From that time on geophysics, particularly the seismograph, was used as an exploratory tool.

By 1929 a sufficient number of oil tests had been drilled to give sketchy control for a subsurface map of the Permian Basin. Its outline was fairly well defined, and oil discoveries within the basin suggested the probability of interior folds. In 1930 Lon D. Cartwright published a report with a cross section and map, showing a large positive area located in the approximate middle of the basin, which he named the Central Basin Platform. The map showed the platform trending north-northwest across the Texas-New Mexico line into Lea County. By this time a sufficient number of wells had been drilled to show that the Central Basin Platform was a structural feature common to both states.
Because of the great distances to the markets and the lack of pipelines through which to move the oil, deep tests were not economically justified. Consequently, all oilfields discovered before 1928 were producing from Permian dolomite or sand, from depths less than 4,500 feet. A deep test was started in the Big Lake oil field in Reagan County, and in 1928 a large flow of oil and gas was encountered at 8,525 feet. Fossil evidence showed the producing section to be of Ordovician age. 

This discovery greatly expanded the prospects for the Permian Basin's becoming a major oil and gas producing area; however, because of the Great Depression in the early 1930s few locations for deep tests were made prior to 1936. 

With the coming of World War II the need for oil was urgent, and it became economically justified to drill more and deeper tests. During the war many new oil and gas zones were found not only in rocks of Permian and Ordovician age but also from zones in each geologic system from Permian through Cambrian and from practically every known type of subsurface trap.

Two of the largest accumulations were the Horseshoe Atoll and the Spraberry trend area. Horseshoe Atoll is a subsurface accumulation of fossiliferous limestone, as much as 3,000 feet thick, deposited during Pennsylvanian and early Permian time in the northern part of the Midland basin in West Texas. It is a horseshoe-shaped mass about ninety miles across and seventy miles from north to south. The crest of the atoll is a series of irregular hills and depressions. Oil migrated to many of these buried hills and was trapped in the porous rock, resulting in a line of oilfields nearly 200 miles in length. The Spraberry trend area is located in the region between the south end of the Llano Estacado and the north part of the Edwards Plateau.

More at the link.

I posted this mostly for the peak oil folks who visit the site.