Introduction to the Permian Basin — Part 7: Recent activity and growth

Intro to Permian HeaderEnlarge GraphContinued from Part 6: Resource potential and oil vs. gas split 

The Permian Basin and U.S. energy independence

As we’ve seen, the Permian Basin has been one of the primary drivers of domestic oil growth and has been heralded as one of the pillars to move the country closer to energy independence. The following statistics convey a sense of the recent growth and activity in the region.

Recent growth

The chart below shows the growth in oil produced from the Permian Basin over the past few years. Production in the region had bottomed out in the mid-2000s until beginning to rise around 2007.

RRCT - Permian Oil ProducedEnlarge Graph

 

Also, the amount of drilling permits issued in the Permian Basin has increased dramatically, having increased nearly threefold from 2009 to 2012.RRCT - Permian Drilling Permits IssuedEnlarge Graph

 

Rig counts in the Permian Basin have increased over fourfold from 2009 to 2012, according to Baker Hughes and the Railroad Commission of Texas.

RRCT - Permian Oil Rig CountsEnlarge Graph

 

Not only have rig counts increased, but the composition of horizontal versus vertical rigs has also changed recently. As lately as 2011, 96% of rigs in the Spraberry and Wolfcamp drilling regions of the Permian Basin were vertical rigs, as compared to 77% in May 2013. The prevalence of horizontal drilling has grown, as wells are more expensive upfront, but generally speaking, horizontal wells generate greater hydrocarbon production, making the increased initial cost worth it.

spraberry - wolfcampEnlarge Graph

 

Growth isn’t confined to recent years, but Permian-based companies such as Pioneer (PXD) anticipated greater production in the future as well. The following chart displays PXD’s projections for production in the Spraberry and Wolfcamp formations in the Permian Basin.

PXD - Projected GrowthEnlarge Graph