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Permian Shale Oil Production Rose Again in August

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Sep. 21 2015, Published 4:44 p.m. ET

Permian shale oil production

On September 14, 2015, the EIA (U.S. Energy Information Administration) released its latest Drilling Productivity Report. The EIA estimates that the Permian Basin’s crude oil production amounted to ~1.98 MMbpd (million barrels per day) in August. This is only 0.60% higher than July’s production total. However, it’s an 18% rise over the production in August 2014. In August, the Permian shale crude oil production rose month-over-month for the seventh time in a row.

The Permian shale oil production rose from 834,400 bpd (barrels per day) in August 2007 to 1.98 MMbpd in August 2015. That’s a rise of 137% in eight years.

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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). RSP Permian accounts for 1.56% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). EOG Resources accounts for 3.13% of the iShares U.S. Energy ETF (IYE).

If the Permian Basin’s oil production rises, midstream operators transporting oil and gas in this region will also benefit. This includes 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 August, the number of rigs working in the Permian Basin was 254—up from 241 in July. There were 565 active rigs in the Permian Basin in November last year—the highest rig count in the past seven years. The number of active rigs in the US fell significantly in the past year. For a more recent analysis on Permian rigs, read Permian Basin Rig Count down Again the Week Ended September 11.

Monthly additions from one average rig

The EIA calculates that the average Permian Basin rigs added the production of 360 bpd (barrels per day) in August 2015—a 64% rise since August 2014. In the past eight years, the additional production per rig rose 5.8x. 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.

The Bakken is one of the most prolific crude oil shales in the US. In the next part of this series, we’ll discuss why.

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