Forecasts for Capital Spending in the Permian Basin


Dec. 15 2017, Updated 7:11 a.m. ET

Permian capex

According to a report released by IHS Markit, Permian investments are expected to increase from $8 billion in 2016 to more than $41 billion in 2021. That represents a CAGR (compound annual growth rate) of 38%. In comparison, investments in the lower 48 onshore are expected to grow at a CAGR of 27%.

Permian capex (capital expenditure) will represent almost a third of total lower 48 onshore spending through 2021, according to IHS Markit.

For 2018, Chevron’s (CVX) forecast capex in the Permian is expected to be $3.3 billion compared to $2.5 billion in 2017.

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Will rising costs be offset by productivity?

However, according to IHS Markit, despite the economic attractiveness of the Permian Basin, in 2017, rising service sector costs will rise per-well capex by more than 15%. Rising costs could also put pressure on break-even prices. To know more, read Part 7 of this series.

That being said, IHS Markit believes that rising costs will likely be offset by increased productivity, especially in the early-life Permian plays. Increasing crude oil prices could also benefit Permian producers.


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