Dueling Banjoes Comes To Mind -- April 6, 2018 -- Staggering

 Updates

April 6, 2018: see first comment --

About 450 rigs currently drilling.

Enno's site had about 3,000 new wells in 2017, let's say 9 per day.
Peg each new well at 1,000 barrels/day to start, giving 9,000 bpd increase.
90 days of that - with no drop off in output - is over 800,000 barrels of oil.

That is a lot of oil. 

My thoughts: Think of that. Compare 450 rigs drilling in the Permian vs 60 rigs drilling in the Bakken. 

Later, 10:03 p.m. Central Time: the original note began with links regarding the Permian and then morphed into comparing the Bakken boom (2007 - 2014) with the current Permian boom (2014 -- the present day).

Having said that and having focused on that, one can easily forget the much bigger story: the absolutely incredible story with regard to US shale. It is truly amazing.

Look at this screenshot taken from this site:

Do you see what I see? If I'm reading the chart correctly, the Permian hit 1.9 million bopd just before the end of the year (2017) and then dropped back a bit (North Dakota Bakken -- supposedly a much smaller play, was producing about 1 million bopd in the same time frame). But I digress. Back to the point. If I'm reading the chart correctly, the Permian hit 1.9 million bopd just before the end of the year (2017) and then dropped back a bit.

1.9 million bbls (slightly less) at the end of 2017. Hold that thought.

It was reported earlier this week (and posted on the blog) that the EIA estimates that the Permian set a new production record with 3.1 million bopd. If that's accurate, that is staggering. A jump from 1.9 million bopd to 3.1 million bopd over any time period is staggering (remember Hubbert's peak oil theory) but in this case, the Permian may have gone from 1.9 million bopd to 3.1 million bopd in less than three months. Absolutely staggering.

If that comes true -- a jump to 3.1 million bopd from 1.9 million bopd  -- what's the delta? Exactly "another Bakken." The delta is 1.2 million bopd -- North Dakota (mostly the Bakken) is producing about 1.2 million bopd. Staggering.

Original Post

Crash? There's a very, very short summary of the Permian over at SeekingAlpha today but it articulates at least to some extent what I've been noticing for the past year. A reader comments on a SeekingAlpha article regarding the Permian:

• operations in the Permian Basin are like being on a tread mill; once drilling activity slows production will drop like a rock
• current production growth is limited due to the lack of transportation or the ability to flair NG from existing wells
• service costs are escalating at double-digit rates with the acreage cost in the prime areas running as high a $60,000 or more per net mineral acre it makes more sense to sell your acreage than to drill it. I've sold some in excess of $80,000 per net mineral which is just nuts 
• current pumping technology is not able to pump the oil from laterals that are running over 10,000 feet without constant breakdowns resulting in higher operating costs
• well communication has been a known problem is the Basin for a long time and is only getting a lot worse. It's a known fact that you can take a 30-year-old Spraberry well that is producing 1-2 Bbls per week and shut it in for an extended period of time and the well will recharge itself over time. It's one of the more permeable basins in the country [this one I'm not concerned about]

Those were the very same concerns we heard during the Bakken boom and the Bakken did just fine. The difference for me:

• Permian acreage trading for as much as $80,000 / acre
• during the early Bakken boom, WTI was selling for well over $100/bbl 

But this is the problem: because the Permian is getting so much more coverage than the Bakken ever did (except for the negative stories on fracking and pipelines), once we start hearing about operators failing in the Permian, it will have a snowball effect. It's easy to forget that not all operators survived in the Bakken either.

Operators that bought in late (XOM?) could be in trouble; operators that bought decades ago (COP) might do very, very well.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or what you think you might have read here.

The link also includes a nice graphic for those interested in the Concho - RMS Permian deal.

The comment posted above were in reply to a "Blue Quadrant Capital Management" article. In response to another comments, "Blue Quadrant" replied:

If you go to this site, you will see that wells completed in 2010 in the Bakken are still flowing .. in fact production from these wells is still at 20% of the initial production rate ...

The long production tail post the first few years of decline is actually quite a positive dynamic for shale companies It doesnt seem to be the same in the Permian though , as we can see wells that were completed in 2012 , although they are still flowing now, the production from these wells are only around 10% of the initial production rate ... whether this will change or not, or if it is due to more intensive early fracs in the Permian as opposed to the Bakken , or an entirely different geology, cannot say ...

This link (the same as above) has a very, very nice interactive chart regarding the Bakken. 

No, I'm not going to post Dueling Banjoes. I never cared for that song. Instead:

Dreamin', Johnny Burnette