US Department Of The Interior Press Release -- December 6, 2018

Another e-mail from December 6, 2018, that I missed, from the USGS:

Date: December 6, 2018Contact: Interior_Press@ios.doi.gov 

USGS Identifies Largest Continuous Oil and Gas Resource Potential Ever Assessed

Estimates Include 46.3 Billion Barrels of Oil, 281 Trillion Cubic feet of Natural Gas, and 20 Billion Barrels of Natural Gas Liquids in Texas and New Mexico’s Wolfcamp Shale and Bone Spring Formation

WASHINGTON - Today, the U.S. Department of the Interior announced the Wolfcamp Shale and overlying Bone Spring Formation in the Delaware Basin portion of Texas and New Mexico’s Permian Basin province contain an estimated mean of 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids, according to an assessment by the U.S. Geological Survey (USGS). This estimate is for continuous (unconventional) oil, and consists of undiscovered, technically recoverable resources.
"Christmas came a few weeks early this year," said U.S. Secretary of the Interior Ryan Zinke. "American strength flows from American energy, and as it turns out, we have a lot of American energy. Before this assessment came down, I was bullish on oil and gas production in the United States. Now, I know for a fact that American energy dominance is within our grasp as a nation."
“In the 1980s, during my time in the petroleum industry, the Permian and similar mature basins were not considered viable for producing large new recoverable resources. Today, thanks to advances in technology, the Permian Basin continues to impress in terms of resource potential. The results of this most recent assessment and that of the Wolfcamp Formation in the Midland Basin in 2016 are our largest continuous oil and gas assessments ever released,” said Dr. Jim Reilly, USGS Director. “Knowing where these resources are located and how much exists is crucial to ensuring both our energy independence and energy dominance.”    
Although the USGS has previously assessed conventional oil and gas resources in the Permian Basin province, this is the first assessment of continuous resources in the Wolfcamp shale and Bone Spring Formation in the Delaware Basin portion of the Permian. Oil and gas companies are currently producing oil here using both traditional vertical well technology and horizontal drilling and hydraulic fracturing.
The Wolfcamp shale in the Midland Basin portion of the Permian Basin province was assessed separately in 2016, and at that time it was the largest assessment of continuous oil conducted by the USGS. The Delaware Basin assessment of the Wolfcamp Shale and Bone Spring Formation is more than two times larger than that of the Midland Basin. The Permian Basin province includes a series of basins and other geologic formations in West Texas and southern New Mexico. It is one of the most productive areas for oil and gas in the entire United States.
“The results we’ve released today demonstrate the impact that improved technologies such as hydraulic fracturing and directional drilling have had on increasing the estimates of undiscovered, technically recoverable continuous (i.e., unconventional) resources,” said Walter Guidroz, Program Coordinator of the USGS Energy Resources Program.
Undiscovered resources are those that are estimated to exist based on geologic knowledge and already established production, while technically recoverable resources are those that can be produced using currently available technology and industry practices. Whether or not it is profitable to produce these resources has not been evaluated.
USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources of onshore lands and offshore state waters. The USGS Delaware Basin Wolfcamp shale and Bone Spring Formation assessment was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocols.
The new assessment of the Delaware Basin Wolfcamp shale may be found online. To find out more about USGS energy assessments and other energy research, please visit the USGS Energy Resources Program website.

The Market, Energy, And Political Page, Part 2, T+ 50 -- October 2, 2018

Exactly what happened in the Bakken at the height of the boom. From DallasNews:

America's fastest-growing source of energy has a power problem.

The Permian Basin, which produces almost 4 million barrels of oil a day, has expanded so quickly that suppliers of the electricity needed to keep wells running are struggling to keep up. The Delaware portion alone consumed the equivalent of 350 megawatts this summer, tripling the load from 2015. That's enough to power about 280,000 U.S. homes. And providers say the draw is likely to triple again by 2022.

While providers are rushing to build new power lines, it takes three to six years to get them up and working. In the meantime, drillers are bemoaning the reliability of the system and desperately seeking alternatives, exploring the use of solar and natural gas to fuel power-generating gear on-site.

It looks like Boone Pickens was just too early with regard to his wind farms in west Texas. Of course, he was moving that electricity to the large cities in east Texas, not to the oil fields. 

And more. Exactly what happened in the Bakken six years ago. Another story being carried by Yahoo!Finance:

The west Texas drillers that drove the shale revolution have overwhelmed the region's infrastructure with oil production -driving up costs, depressing regional oil prices and slowing the pace of growth.

The U.S. government continues to forecast the country's oil output rising to fresh record. But competition for limited resources in Texas is making it harder for shale producers to turn a profit and encouraging some to invest elsewhere.

Texas is home to the Permian Basin, the largest U.S. oil field and the center of the country's shale industry. In the past three years, production from the Permian has risen a whopping 1.5 million barrels per day (bpd) to 3.43 million bpd.

All that oil means pipelines from the shale patch are full, so producers are paying more to transport oil on trucks and rail cars. Shortages of labor, water and even the fuel used in fracking are driving up production costs.

The Permian Midland USGS Assessment -- An Oil & Gas Journal Update -- June 23, 2018

Updates

June 24, 2018: the graphic below is already out of date. Look at the "Western Gulf Province": 1.73 billion bbls. The USGS just released the 2018 assessment of the Eagle Ford, which came in at 8.5 billion bbls of crude oil. For an overview of the USGS Western Gulf Province, see this site (conventional gas). It's possible the updated graphic will include two areas: the Western Gulf Province (conventional) and the Eagle Ford (unconventional).

Original Post

Wow, I'm in a good mood. So much great stuff being reported. I can't keep up but that's good news.

This article needs to be archived. I finally understand the Permian a bit better. Mike Filloon had the Permian figured out many years ago, but, for me, it never sunk in. Re-reading Filloon's articles on the Permian and now this article in the OGJ, I finally have a better understanding of the Permian. The OGJ article was published June 4, 2018, but other sites suggest the USGS Permian assessment was done during 2016, and first reported in 2017, with some additional articles on the same subject after. For now, I guess we will refer to this as the USGS Permian Assessment, 2017.

Unfortunately, it may be behind a paywall. Here are the high points.

The Permian, there are three sub-basins:

• the Midland, to the east (this is the area assessed in this article; two plays in this basin assessed: the Wolfcamp and the Spraberry)
• the Central Basin Platorm
• the Delaware

The formations, many, but these are the most important right now:

• Pennsylvanian-Permian Wolfcamp shale: underlies both the Midland and the Delaware, and extends across the Central (in other words, underlies the entire Permian Basin)
• Bone Spring formation: the lateral and time-equivalent of the Spraberry in the Delaware
• Spraberry: see above

Intro: the USGS recently assessed the Wolfcamp shale in the Midland basin portion of the Permian basin for continuous (unconventional) oil and gas resources, and completed a reassessment of the Spraberry formation for both continuous and conventional oil and gas. Combined, the assessments of the Spraberry formation and the underlying Wolfcamp shale in Midland basin comprise the largest domestic continuous oil assessment in the contiguous US (including Alaska).

Great graphic with all (?) US producing areas assessed by USGS and undiscovered, technically recoverable resources:

• Permian Basin: 24.19 (this is a little confusing, because the Midland was assessed at 24.2 and yet the Midland is only one of the three basins in the Permian -- the Midland, the Delaware, and the Central basin -- see very last line in this post -- that explains it)
• Williston Basin: 7.62
• Western Gulf: 1.73
• Appalachian basin: 1.4
• Alaska North Slope: 0.94
• North Central Montana: 0.64
• Paradox basin: 0.47
• Cherokee platform (eastern OK): 0.46
• Powder River basin: 0.42
• Anadarko basin: 0.39 
• Bend Arch Fort Worth basin: 0.17
• Southwestern Wyoming: 0.10
• Denver basin: 0.04
• Uinta-Piceance basin: 0.03
• Montana thrust belt (western MT along Idaho border): 0.03
• San Joaquin basin: 0.02
• Los Angeles basin: 0.01
• Bighorn basin: 0.01 
• Mean total: 39 BBO (note: mean)
• most areas were assessed between 2001 - 2018

Here's the graphic:

Spraberry formation:

• upper, middle, and lower
• operators mostly interested in middle and lower Spraberry
• informally, the lower Spraberry is further sub-divided into the lower Spraberry shale and the lower Spraberry (similar to the Bakken; more on this later)
• the industry also refers to a "Jo-Mill" play in the upper section of the lower Spraberry, a silt-rich interval
• recently assessed, 2017

Wolfcamp shale: divided into a total of six AUs

• Midland Basin Wolfcamp A Continuous Oil AU
• Midland Basin Wolfcamp B Upper Continuous Oil AU
• Midland Basin Wolfcamp B Lower Continuous Oil AU
• Midland Basin Wolfcamp C Continuous Oil AU
• Midland Basin Wolfcamp D Continuous Oil AU
• Midland Basin Northern Wolfcamp Continuous Oil AU
• assessment based on limited well data with 0.10 - 0.14 MMBO, with the highest EURS estimated within the Wolfcamp A and B horizons

Total oil resource, Spraberry:

• 4.2 billion bbls of oil
• 3.1 tcf of gas
• majority of this assessment is attributed to the two Spraberry continuous AUs (the Middle and the Lower)
• a mean of 5 million bbls was assessed for the Northern Spraberry Conventional AU
• in comparison, the mean total assessed in 2007 for continuous and conventional resources of the Spraberry formation (based on vertical wells) was 530 million bbls of oil 

Total oil resource, Wolfcamp:

• assessed for the first time in 2016
• 20 billion bbls of oil
• 16 tcf of gas within six continuous AUs

Total oil resource, Wolfcamp + Spraberry:

• 24.2 billion bbls in the Midland Basin

The report references the 2013 Bakken assessment:

• 7.4 billion bbls (Bakken + Three Forks)
• at the time, this was the largest domestic oil assessment conducted by the USGS
• the addition of the Heath (Tyler) formation, assessed in 2016, raises the total assessed continuous oil resources in Williston basin to 7.6 billion bbls of oils
• the recent assessments of the Spraberry and Woflcamp formations in the Midland basin nearly tripled the Bakken, Three Forks, and Heath formations
• the Bakken is currently being re-assessed by the USGS; at the time of the last USGS assessment of the Bakken, CLR's EUR type curves were 400 - 500 million bbls; CLR's EUR type curves now exceed 1 million bbls;

Conclusions:

• the Midland basin contains the largest estimated continuous oil resource by the USGS.
• additional assessments are underway in neighboring Delaware basin that will ultimately alter the total mean resources projected by the USS for the the greater Permian basin

Two Articles On The Permian After A Very, Very Busy Day-- June 12, 2018 -- Reading Between The Lines, The Permian Could Be A Disaster For Some Operators In The Short Term (One To Two Years) Including Apache

The Permian is turning out to be a bigger challenge than operators acknowledged two years ago. All good news for the Bakken.

The first article is a "keeper." It has been archived. Lots of incredible data. 

From Michael Fitzsimmons over at SeekingAlpha: an update on Apache's Alpine oil field.

• the Alpine discovery, announced two years ago, is a world-class field
• but it is predominately a wet-gas field which will require substantial midstream infrastructure to gather, transport, and process
• meantime, the pricing outlook for dry-gas and NGLs is anything but certain
• investors looking for a large independent oil and gas E&P firm might consider the largest of them all instead: ConocoPhillips
• it appears as though the Alpine High field is primarily a wet-gas play, and overwhelmingly so
• specifically, note the very low oil split of 15% (or less...) of a typical well's production. And while NGLs contribute ~50% of the production, that still leaves 35% (or more) of the split to dry gas. That's one thing we don't need a whole lot more of - especially in the Permian Basin where dry gas prices already are below NYMEX
• Mike cites an RBN Energy blog today: What about all those NGLs? A blog on RBN Energy today (see Magical Mystery Tour - Soaring NGL Supplies May Soon Overwhelm Mont Belvieu Fractionation Capacity) points out that NGLs "don't do anyone much good until they are fractionated into "purity products" like ethane, propane, normal butane..." and that the existing fractionation plants in Mont Belvieu are running flat-out to keep up with already burgeoning production
• In the case of Phillips 66, it is probably getting much of its feedstock from its mother company ConocoPhillips, which is pumping the heck out of the Eagle Ford shale these days
  

From SeekingAlpha news editor:

• a worsening pipeline bottleneck in the Permian Basin is seeing investors favor more diversified independents with a smaller footprint in the area
• EOG Resources CEO Billy Thomas says Permian constraints likely will weigh on U.S. production growth next year so much that it will be "much slower next year than it is this year," with inadequate infrastructure in place to take away gas and oil until late 2019 or 2020
• "Allocating away from the basin or into a Permian name protected by either firm transport agreements or meaningful basis swaps is likely a necessary move," Seaport Global says, listing APC, DVN, PXD, PE, AREX and WPX as among the least exposed to the Permian's "differential blowout" while APA, FANG, CDEV, XEC and AXAS are the most exposed
• Argus says money managers are targeting firms that have minimum exposure to the widening differentials, both with Permian crude and Brent, but also are low-cost operators with presence across a range of basins, such as COP, MRO and APC

 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 may have read here.

Permian Operators Facing Huge Challenges -- April 18, 2018

WTI is surging (?) -- it might hit $70 this week. But a reminder, from RBN Energy:

Price differentials in the Permian Basin are widening at a rapid pace.

The discount for Midland crude to West Texas Intermediate (WTI) at Cushing has widened by over $4/bbl since the beginning of March and the discount to Magellan East Houston (MEH) crude was over $7/bbl yesterday (April 3, 2018).

Permian production is increasing at a breakneck pace as new players are entering the scene. Private equity-backed exploration and production companies (E&Ps) are no longer just acquiring and flipping acreage, as they are being forced to prove their assets are profitable and can generate a return on investment.

The combination of large drilling plans from the majors and new production from these smaller operators — with no new pipeline takeaway capacity in sight — has sent Permian crude pricing into a tailspin. Today, we begin a new series on the recent slide in Permian prices, how new producer strategies are contributing to it, and what it means for pipeline space, trucking and midstream infrastructure.

We saw the same thing in the Bakken during the boom.

Remember: a lot of the operators paid a huge amount of money to get into the Permian.

From Platts this week:

Pipeline capacity is currently constrained out of the Permian, reflected in wide price discounts for Midland WTI crude. Midland WTI is averaging at a $4.33/b discount to Cushing WTI so far in April, compared to a 93 cents/b premium in January, S&P Global Platts data shows.

WTI Midland moved higher on the news of additional takeaway capacity Monday. WTI Midland was assessed at a $3.70/b discount to Cushing WTI, up 35 cents/b on the day.

S&P Global Platts Analytics is projecting crude oil output in the Permian to reach 5.266 million b/d by 2020, compared with 3.657 million b/d in 2018.

If Permian goes to "5," the Bakken goes to "2."