Who Controls the Permian?
There’s been an ongoing pendulum swing between majors and independents as the controlling group of the Permian basin’s destiny for many years, but who controls the region now?
Well, according to a new Wood Mackenzie (Woodmac) editorial from the company’s Americas upstream oil and gas research director Benjamin Shattuck, new deals like the Pioneer and Parsley combination are swinging the pendulum from the majors back to the independents “fast”.
“The combined Pioneer/Parsley entity holds almost a million acres in the heart of the Midland Basin,” Shattuck stated in the editorial, which was posted on Woodmac’s website on Tuesday.
“Pioneer is once again a Permian heavyweight. The combined company will produce more regionally than ConocoPhillips and Concho, more than ExxonMobil, and more than Occidental and Anadarko. Considering the massive spending pullbacks of Chevron and ExxonMobil earlier this year, Permian forecasters need to recalibrate their models back to Pioneer’s plans,” Shattuck added in the editorial.
“Even with a lower reinvestment rate than before the deal and the variable dividend not coming into play until 2022, Pioneer will still grow five percent next year,” Shattuck went on to state.
The Woodmac research director highlighted in the editorial that companies like Cimarex and Pioneer led tight oil exploration and commercialization through the first era of Wolfberry and Wolfcamp unconventional activity in the late 2000s. Things changed a few years ago after ExxonMobil acquired BOPCO, however, Shattuck noted, adding that majors stepped-up and unveiled integrated value-chain strategies with company production targets above one million barrels of oil equivalent per day.
According to Shattuck, the majors had been in the driver’s seat for the last two years. Shattuck stated that many independents were “somewhat shell-shocked” at how fast capital programs ramped, highlighting that ExxonMobil had over 60 rigs running at peak last year.
The Permian basin straddles Texas and New Mexico and includes cities such as Midland, Odessa, Hobbs and Carlsbad. According to a report from the Permian Strategic Partnership released in September this year, the Permian contains more than 92 billion barrels of oil in proven reserves and enough natural gas to meet U.S. household demand for 60 years.
The report also revealed that, while containing a small fraction of the populations of Texas and New Mexico, the Permian is capable of contributing up to nearly 11 percent of Texas’ gross domestic product and more than 18 percent of New Mexico’s.
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