Increase in costs
According to a report by IHS Markit released in June 2017, the Permian Basin will see increasing costs next year, mainly driven by completion costs and logistics- and supply-related costs. Read Part 6 of this series to find out more.
Specifically, the Delaware Basin is expected to see a higher rate of increase in costs compared to the Midland Basin. Its remote location could result in higher logistics and labor-related costs.
Potential increase in break-even prices
In the above chart, we see that constraints such as rail transportation, labor challenges, and water constraints could push the break-even prices for the Delaware and Midland Basins. The chart is based on the average breakeven for wells in the Wolfcamp Midland and Wolfcamp Delaware in 2016. According to IHS Markit, these short-intermediate constraints could push break-even prices for the Wolfcamp Midland beyond $49 per barrel and beyond $41 per barrel in the Wolfcamp Delaware.
Parsley Energy (PE) holds both Wolfcamp Midland and Wolfcamp Delaware positions. The company was very active this year, acquiring acreage positions mostly in the Midland Basin. To know more, be sure to read PE Announced 2nd Permian Acquisition in Less than a Month.