Permian Shale Oil Production Up Marginally in June

Permian shale oil production

On July 13, 2015, the EIA (U.S. Energy Information Administration) released its latest Drilling Productivity Report. The EIA estimates that Permian Basin crude oil production amounted to ~2.04 MMbpd (million barrels per day) in June. This is 0.3% higher than May’s production total and a 29% increase over production in June 2014.

Permian Shale Oil Production Up Marginally in June

Permian shale oil production increased from 834,400 barrels per day in June 2007 to 2.04 MMbpd in June 2015. That’s an increase of 144% in eight years.

Oil production per rig

In June 2015, the Permian Basin produced 296 bpd (barrels per day) per rig, a 41% gain in production per rig since June 2014. The horizontal drilling and hydraulic fracturing process has unlocked huge oil reserves in the Permian Basin. The most productive Permian formations are the Spraberry, Wolfcamp, and Bone Spring formations.

What this means for Permian producers

Higher crude oil production should benefit energy producers operating out of the Permian Basin. Active oil and gas producers in the Permian Basin include Concho Resources (CXO), RSP Permian (RSPP), EOG Resources (EOG), Laredo Petroleum (LPI), and Matador Resources (MTDR). RSPP makes up 1.54% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

If the Permian Basin’s oil production rises, midstream operators transporting oil and gas in this region would also benefit. These include MLPs like Magellan Midstream Partners (MMP), Regency Energy Partners (RGP), Plains All American Partners (PAA), and Energy Transfer Partners (ETP).

Rigs in the Permian Basin

In June, the number of rigs working in the Permian Basin fell marginally to 232, down from 234 in May. There were 565 rigs active in the Permian Basin in November last year, the highest rig count in the past seven years. The number of active rigs in the United States has fallen significantly in the past year. For more on this topic, read Permian Basin Rig Count Surged Ahead in Week Ending July 10.

The Bakken is one of the most prolific crude oil shales in the United States. In the next part of this series, we’ll find out why.