Monday April 8, 2019: 27 wells for the month; 27 wells for the quarter
- 35216, SI/NC, XTO, Teddy Federal 12X-5A, North Fork, no production data,
- 33681, drl, Crescent Point Energy, CPEUSC Nelson 7-30-31-157N-99W TFH, Lone Tree Lake, no production data,
- 30933, SI/NC, Armstrong Operating, Pederson 33-3, Hamlet,, no production data,
Saturday, April 6, 2019: 24 wells for the month; 24 wells for the quarter
- 35217, SI/NC, XTO, Teddy Federal 12X-5F, North Fork, no production data,
- 34999, 240, Lime Rock Resources, Jaeger State 2-34-26H-144-97L, Cabernet, t10/18; cum 62K 2/19;
- 34620, 1,002, Enerplus Camelia 148-94-16CH, Eagle Nest, t10/18; cum 48K 2/19;
- 33665, 4,551, MRO, Wilkinson USA 11-1H, 45 stages, 8.5 million lbs, Reunion Bay, t1/19; cum 68K in 30 days;
| $63.39 | 4/8/2019 | 04/08/2018 | 04/08/2017 | 04/08/2016 | 04/08/2015 |
|---|---|---|---|---|---|
| Active Rigs | 62 | 58 | 49 | 31 | 91 |
RBN Energy: Permian crude differentials squashed amidst a potential overbuild.
Crude differentials in the Permian are getting squeezed. The spread between Midland and WTI at Cushing widened out to near $18/bbl at one point in 2018, when pipeline capacity was scarce. But that same spread averaged a discount of only $0.25/bbl in March 2019. Differentials between Midland and the more desired sales destination at the Gulf Coast are also in a vise. What gives? Production in the Permian continues to climb, but the rapid pace of growth we saw in 2018 has slowed down a bit lately, with fewer rigs in service and fewer new wells being brought on each month. More importantly, we’ve seen several new pipeline expansions and pipeline conversions come online in bits and bursts — in some cases, ahead of schedule — and this new chunk of pipeline space has compressed Midland pricing. In today’s blog, we begin a series on Permian crude takeaway capacity and differentials, with a look at the handful of new projects that have come online in the past few months and what has happened to Permian prices as a result.
It was only a matter of time before the crude oil market found a way to kill the price spread. It’s happened again and again. A few years back, pipeline takeaway capacity in both the Bakken and the Powder River Basin was limited, crude-by-rail was getting built out at an impressive clip, and traders were taking advantage of unique pipeline, rail, and trucking options to capture arbitrage opportunities on double-digit spreads. While producers were seeing low netbacks and weren’t happy, traders and end-market users were living the good life. Over time though, more than enough pipeline capacity got built out in those areas, spreads tightened, and most of the crude-by-rail and niche trucking opportunities were mothballed. Midstream companies saw wide price differentials, recognized the opportunity, built projects like the Dakota Access Pipeline, and the spread was dead.
That’s similar to what we’ve seen materializing in the Permian Basin over the past six months or so.
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