permian basin production and looming issues · 1 occidental energy companyinc. 276,024 556,347 2...

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


“Completion Design Changes and the Impact of US Shale Well Productivity”


http://www.petronerds.com/wp-content/uploads/2017/11/OIES-PetroNerds-Completion-Design-and-Productivity-2017.pdf

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


Extraction Oil and Gas, September 2017

Permian Basin Production


-

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


-

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


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


Source: Diamondback and Cimarex April 2018 Investor Presentations

Pioneer – Then and Now


Source: Pioneer Natural Resources Oct 2013 Investor Presentation Source: Pioneer Natural Resources April 2018 Investor Presentation

Horizontal Liquid Production


-

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


Associated Gas and Produced Water


-

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


Gas to Oil Ratio in the Permian Basin



API Gravity in the Permian Basin



Production by API Gravity


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

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5/1

/20

10

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11

/1/2

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3/1

/20

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5/1

/20

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7/1

/20

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9/1

/20

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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+


Permian Basin Decline Curve


-

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


Measuring Productivity


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


Bone Spring Reservoir Decline Curve


-

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


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


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.


Midland Basis Swaps: Q4 2016 vs Q4 2017


Source: PetroNerds, HedgeAware. Survey of 41 publicly traded E&Ps.

permian basin production and looming issues · 1 occidental energy companyinc. 276,024 556,347 2...

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