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Permian Basin Production and Looming IssuesT R I S H A C U R T I S , P R E S I D E N T A N D C O - F O U N D E R , P E T R O N E R D S
T R I S H A @ P E T R O N E R D S . C O M
F O R T H E E N E R G Y P O L I C Y R E S E A R C H F O U N D A T I O N . , I N C .
A P R I L 1 9 , 2 0 1 8
1© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 2
Source: Extraction rig, September 2017
PetroNerd:
Podcasts
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“Completion Design Changes and the Impact of US Shale Well Productivity”
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http://www.petronerds.com/wp-content/uploads/2017/11/OIES-PetroNerds-Completion-Design-and-Productivity-2017.pdf
Spud to Total Depth in Less than Three Days
5© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645
Extraction Oil and Gas, September 2017
Permian Basin Production
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 6
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
1/1
/20
00
6/1
/20
00
11
/1/2
00
0
4/1
/20
01
9/1
/20
01
2/1
/20
02
7/1
/20
02
12
/1/2
00
2
5/1
/20
03
10
/1/2
00
3
3/1
/20
04
8/1
/20
04
1/1
/20
05
6/1
/20
05
11
/1/2
00
5
4/1
/20
06
9/1
/20
06
2/1
/20
07
7/1
/20
07
12
/1/2
00
7
5/1
/20
08
10
/1/2
00
8
3/1
/20
09
8/1
/20
09
1/1
/20
10
6/1
/20
10
11
/1/2
01
0
4/1
/20
11
9/1
/20
11
2/1
/20
12
7/1
/20
12
12
/1/2
01
2
5/1
/20
13
10
/1/2
01
3
3/1
/20
14
8/1
/20
14
1/1
/20
15
6/1
/20
15
11
/1/2
01
5
4/1
/20
16
9/1
/20
16
2/1
/20
17
7/1
/20
17
12
/1/2
01
7
Wat
er –
Bar
rels
Per
Day
Liq
uid
–B
arre
ls P
er D
ay/
Gas
–m
cd/d
Total Liquid Production Total Gas Production Total Water Production
Water – 15 mbd
Oil – 2.9 mbd
GAS – 9 plus Bcf/d
Permian ProblemsWith crude oil comes associated natural gas and produced water
Gassy reservoirs can help drive oil production – at least in the Permian’s case.
It isn’t just the Permian that is the problem…..gas EVERYWHERE
Ultra Petroleum – Pinedale, Wyoming
High intensity completions have done wonders for oil production and even more for gas production (IPs and well productivity)
Marcellus
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 7
-
2,000
4,000
6,000
8,000
10,000
12,000
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52
mcf
/d
Month
Marcellus Reservoir Decline Curve
2013 2014 2015 2016 2017
11,300 mcf/d
Source: PetroNerds, DrillingInfo data
Permian Basin Geology and Stratigraphy
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 8
Source: Concho Resources 2nd Quarter 2013 Investor PresentationSource: PERMIAN BASIN PROVINCE (044) By Mahlon M. Ball
The Permian hosts a vast amount of stacked payzones that are actively being drilled and further delineated for the best spacing and completion plans.
Still Early in the GameThis is a highly layered mix of conventional and unconventional reservoirs.
Intense layeringInterbedded shales, sandstones, and carbonates
The Permian Basin has a tremendous amount of potential in terms of stacked pay, but successfully developing these stacked payzones will take a lot of work and a lot of capital.
Stringent leasing requirements in the Permian Basin often prevent optimal asset delineationLand rush, Wall Street push, and high acreage costs
Now operators are trying to delineate, develop, and maintain leasing requirements all at the same time
Cost inflation also causing problems with soo much activity in the Permian
Local sand etc.
Optimal spacing and completion design (frac) is keyStill early in this ball game
Inventory
Well density, parent child problems, all coming into focus
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 9
Source: Diamondback and Cimarex April 2018 Investor Presentations
Pioneer – Then and Now
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Source: Pioneer Natural Resources Oct 2013 Investor Presentation Source: Pioneer Natural Resources April 2018 Investor Presentation
Horizontal Liquid Production
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 11
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,0001
/1/2
00
0
6/1
/20
00
11
/1/2
00
0
4/1
/20
01
9/1
/20
01
2/1
/20
02
7/1
/20
02
12
/1/2
00
2
5/1
/20
03
10
/1/2
00
3
3/1
/20
04
8/1
/20
04
1/1
/20
05
6/1
/20
05
11
/1/2
00
5
4/1
/20
06
9/1
/20
06
2/1
/20
07
7/1
/20
07
12
/1/2
00
7
5/1
/20
08
10
/1/2
00
8
3/1
/20
09
8/1
/20
09
1/1
/20
10
6/1
/20
10
11
/1/2
01
0
4/1
/20
11
9/1
/20
11
2/1
/20
12
7/1
/20
12
12
/1/2
01
2
5/1
/20
13
10
/1/2
01
3
3/1
/20
14
8/1
/20
14
1/1
/20
15
6/1
/20
15
11
/1/2
01
5
4/1
/20
16
9/1
/20
16
2/1
/20
17
7/1
/20
17
12
/1/2
01
7
Wel
l Co
un
t
Bar
rels
Per
Day
Horizontal Well Count Vertical Well Count Total Liquid Production Horizontal Liquid Production Vertical Liquid Production
Source: PetroNerds, DrillingInfo data
Associated Gas and Produced Water
12© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
1/1
/20
00
2/1
/20
01
3/1
/20
02
4/1
/20
03
5/1
/20
04
6/1
/20
05
7/1
/20
06
8/1
/20
07
9/1
/20
08
10
/1/2
00
9
11
/1/2
01
0
12
/1/2
01
1
1/1
/20
13
2/1
/20
14
3/1
/20
15
4/1
/20
16
5/1
/20
17
GA
S -
mcf
/d
Liq
uid
–B
arre
ls P
er D
ay
GAS - Horizontal vs. Vertical
Horizontal Liquid Production Vertical Liquid Production
Horizontal Gas Production Vertical Gas Production
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
1/1
/20
00
2/1
/20
01
3/1
/20
02
4/1
/20
03
5/1
/20
04
6/1
/20
05
7/1
/20
06
8/1
/20
07
9/1
/20
08
10
/1/2
00
9
11
/1/2
01
0
12
/1/2
01
1
1/1
/20
13
2/1
/20
14
3/1
/20
15
4/1
/20
16
5/1
/20
17
Bar
rels
Per
Day
WA
TER
Bar
rels
Per
Day
OIL
WATER – Horizontal vs. Vertical
Horizontal Liquid Production Vertical Liquid Production
Horizontal Water Production Vertical Water Production
10 mbd7 Bcf/d
Source: PetroNerds, DrillingInfo data
Gas to Oil Ratio in the Permian Basin
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 13
Source: PetroNerds, DrillingInfo data
API Gravity in the Permian Basin
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 14
Source: PetroNerds, DrillingInfo data
Production by API Gravity
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 15
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,0001
/1/2
01
0
3/1
/20
10
5/1
/20
10
7/1
/20
10
9/1
/20
10
11
/1/2
01
0
1/1
/20
11
3/1
/20
11
5/1
/20
11
7/1
/20
11
9/1
/20
11
11
/1/2
01
1
1/1
/20
12
3/1
/20
12
5/1
/20
12
7/1
/20
12
9/1
/20
12
11
/1/2
01
2
1/1
/20
13
3/1
/20
13
5/1
/20
13
7/1
/20
13
9/1
/20
13
11
/1/2
01
3
1/1
/20
14
3/1
/20
14
5/1
/20
14
7/1
/20
14
9/1
/20
14
11
/1/2
01
4
1/1
/20
15
3/1
/20
15
5/1
/20
15
7/1
/20
15
9/1
/20
15
11
/1/2
01
5
1/1
/20
16
3/1
/20
16
5/1
/20
16
7/1
/20
16
9/1
/20
16
11
/1/2
01
6
1/1
/20
17
3/1
/20
17
5/1
/20
17
7/1
/20
17
9/1
/20
17
11
/1/2
01
7
1/1
/20
18
Bar
rels
Per
Day
0-25 25-35 35-40 40-45 45-50 50+
Source: PetroNerds, DrillingInfo data
Permian Basin Decline Curve
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 16
-
100
200
300
400
500
600
700
800
0 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243444546474849505152
BA
RR
ELS
PER
DA
Y
MONTH
2013 2014 2015 2016 2017
# of Wells Included in Month 1
2013 1,154 2014 1,656 2015 1,838 2016 1,697 2017 2,604
Source: PetroNerds, DrillingInfo data
Measuring Productivity
17© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645
0
2
4
6
8
10
12
14
16
18
1/1
/08
8/1
/08
3/1
/09
10
/1/0
9
5/1
/10
12
/1/1
0
7/1
/11
2/1
/12
9/1
/12
4/1
/13
11
/1/1
3
6/1
/14
1/1
/15
8/1
/15
3/1
/16
10
/1/1
6
5/1
/17
BA
RR
ELS
PER
FO
OT
First 6 Month Cumulative Production Per Lateral Foot
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1/1
/08
9/1
/08
5/1
/09
1/1
/10
9/1
/10
5/1
/11
1/1
/12
9/1
/12
5/1
/13
1/1
/14
9/1
/14
5/1
/15
1/1
/16
9/1
/16
5/1
/17
FEET
Average Lateral Length
Source: PetroNerds, DrillingInfo data
Bone Spring Reservoir Decline Curve
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 18
-
100
200
300
400
500
600
700
800
900
1,000
0 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243444546474849505152
BA
RR
ELS
PER
DA
Y
MONTH
2013 2014 2015 2016 2017
Source: PetroNerds, DrillingInfo data
Top Permian Basin Operators by Production
Operator Daily Liquids b/d Daily Gas mcf/d
1 OCCIDENTAL ENERGY COMPANYINC. 276,024 556,347
2 PIONEER NATURAL RESOURCES COMPANY 210,694 461,204
3 CONCHO RESOURCES INC. 197,709 659,170
4 EOG RESOURCES INCORPORATED 131,031 407,233
5 APACHE CORPORATION 102,584 477,368
6 EXXON MOBIL CORPORATION 91,408 285,160
7 ANADARKO E&P ONSHORE LLC 88,790 295,583
8 DIAMONDBACK E&P LLC 83,932 123,888
9 CHEVRON U.S.A. INC. 82,071 397,068
10 ENCANA CORPORATION 72,643 157,580
11 PARSLEY ENERGY OPERATIONS LLC 71,987 184,253
12 ENERGEN CORPORATION 68,566 234,231
13 CIMAREX ENERGY COMPANY 64,035 477,567
14 KINDER MORGAN INCORPORATED 51,368 158,186
15 RSP PERMIAN LLC 49,326 104,704
16 MEWBOURNE HOLDINGS INC 48,960 202,757
17 RD SHELL 47,638 117,148
18 DEVON ENERGY CORPORATION 45,105 177,719
19 SURGE OPERATING LLC 44,011 42,721
20 SM ENERGY COMPANY 40,563 73,676
21 LAREDO PETROLEUM INC. 37,173 214,359
22 CENTENNIAL RESOURCE PRODUCTION LLC 35,086 81,964
23 RKI EXPLORATION & PRODUCTION LLC 35,030 185,845
24 JAGGED PEAK ENERGY LLC 30,546 50,148
25 ENDEAVOR ENERGY RESOURCES LP 30,464 63,261
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 19
Source: PetroNerds, DrillingInfodata
Why Everyone Now Cares about “Basis Swaps”Operators can protect themselves against capacity constraints for both oil and gas through outright derivative hedges as well as basis swaps.
Flurry of investor concerns about capacity constraints.
© PETRONERDS LLC | WWW.PETRONERDS.COM | 970-329-1645 20
Midland Basis Swaps: Q4 2016 vs Q4 2017
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Source: PetroNerds, HedgeAware. Survey of 41 publicly traded E&Ps.
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