Friday, July 22, 2016

Permian Basin Natural Gas Update -- RBN Energy -- July 22, 2016

Active rigs:

Active Rigs3268196207182

RBN Energy: Permian gas output levels off, but processing capacity is rising. This is a very, very good article. The 21st century with be the century for North American energy.
Crude oil has always been the big draw for producers in the Permian –– and in the especially prolific Delaware Basin within the Permian –– but the wells there also produce large volumes of “wet” natural gas that needs to be gathered, processed and transported to market. A lot’s been written about the Permian’s still-strong oil production and the infrastructure developed to support it; we’ve also covered natural gas liquids (NGLs) in the play. Now it’s time to delve into the gas processing and gas pipeline capacity out of West Texas and southeastern New Mexico, including pipes into the increasingly important Mexican market. Today, we discuss recent developments on the gas side of the U.S.’s hottest (remaining) oil production area.
It’s been a tough 24 months in the U.S. oil patch, with falling crude oil prices, cutbacks in drilling and production, and –– more recently –– concern that the hoped-for recovery in crude prices may not be gaining traction. The situation’s been a lot less gloomy in the Permian, though, which is “still the one” where the production economics are more favorable than in other plays and where output levels for crude, associated natural gas and NGLs remain very close to the peaks they had reached a few months ago. The Permian region covers about 75,000 square miles of West Texas and southeastern New Mexico (slightly larger than North Dakota, and twice the size of New England!), and includes several sub-regions such as the Delaware, Central and Midland basins (see Figure 1), each with their own geologic and hydrocarbon-production characteristics.
Fracklog disappearing. Remember all those "gloom and doom" stories that fracking would never catch up -- too many oil field workers had left the industry and there would not be enough workers to frack all those DUCs? From Bloomberg: fracklog in the biggest US oil field may all but disappear. The article fails to mention the #1 reason why the fracklog is decreasing in the Bakken: operators are simply drilling fewer DUCs to begin with.

I missed that a few months ago when I couldn't figure out why DUCs were not increasing in the Bakken. On a daily basis, we see very few DUCs being completed, so it did not make sense to read in the monthly Director's Cut that DUCs were decreasing in number.

But then it made sense. Operators were simply drilling fewer wells, and with the few DUCs being completed, the overall number of DUCs decreased.

But the big takeaway story in this article: operators are managing their fracklog just fine despite analysts' worries about lack of oil field workers. I've talked about this before.

The second takeaway: those optimistic reports that the price of oil would move higher by the end of this year (2016) seem to be a bit premature.

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