Higher prices and oil market uncertainty spur record activity in the Permian Basin
Energize Weekly, April 20, 2022
In a response to high oil prices, rising demand and supply concerns in international oil markets, monthly drilling permits for new wells in the Permian Basin hit a record in March, according to industry consultant Rystad Energy.
Since March 7, weekly approved permits for horizontal wells in the basin, which straddles Texas and New Mexico, have run between 188 and 227 for a monthly total of more than 900 new permits.
“This is a clear signal that operators in the basin are kicking into high gear on their development plans, positioning for a significant ramp-up of activity level and an acceleration in the speed of output expansion over the next few months once supply chain bottlenecks ease,” Artem Abramov, Rystad Energy’s head of shale research, said in a statement.
“The surge in permitting activity positions the industry for continuous rig count additions in the second half of 2022 and foreshadows a significant increase in supply capacity from early 2023,” Abramov said.
Since the beginning January, the rig count in the Permian has increased 14 percent to 333 rigs on April 14, according to the Baker Hughes Rig Count.
Not all permits translate into new wells, Rystad Energy cautioned, but the trend in permit activity “points to a continuous uptick in drilling.”
“Weekly horizontal permit approvals have occasionally spiked above 200 in recent years, but the persistently elevated levels currently being seen from regulators in Texas and New Mexico are unprecedented,” the consultant said.
The Midland Basin, the largest section of the Permian, and the Delaware Basin, the second largest, were the targets of most of the permitting activity. The Delaware Basin logged 398 approved horizontal well permits.
The number of new well permits held by privately owned operators, nearly 500, is larger than the number of wells currently being drilled in the Permian in any given month by all operators.
Publicly held independent producers also saw a material increase, being awarded 410 horizontal locations for the month, compared to 230 to 320 in recent months.
Pioneer Natural Resources had 99 horizontal permits approved in March – a record high for the operator’s portfolio. Diamondback Energy was another public producer with unusually high activity in March, at 59.
Approximately 80 operators got at least one new horizontal drill permit approved in the Permian last month – a record-high number, and a significant increase from the typical level of around 60 active operators per month seen in the second half of last year, Rystad Energy said.
Other major oil regions– the Bakken, Eagle Ford and Niobrara combined – also delivered a healthy uptick, with 61 unique operators getting new permits in March.
The Eagle Ford in South Texas contributed the most to this activity expansion, and its rig count rose 35 percent since the beginning of the year to 51 operating oil rigs on April 14.
In a separate report, Rystad Energy noted that as a result of the Russian invasion of Ukraine and rising oil prices, there will be a projected 16 percent increase in oil and gas production investment globally in 2022 to $142 billion.