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Expectations for Permian Basin oil production rises
fool.com ^ | June 10, 2014 | By Matt DiLallo

Posted on 06/10/2014 9:17:23 PM PDT by ckilmer

By Matt DiLallo | More Articles
June 10, 2014 | Comments (0)

  

Source: Chesapeake Energy.

 

Drilling down into the Permian Basin
While the Permian Basin is one of America's oldest and most prolific oil basins, its best days could lie ahead. According to leading Permian Basin driller Pioneer Natural Resources (NYSE: PXD  ) , the Spraberry and Wolfcamp Shale formations in the Permian Basin represent the largest oil field in America, and one of the biggest in the world. As the following slide notes, the field holds an estimated 75 billion barrels of recoverable oil and gas.

Source: Pioneer Natural Resources.  

As that slide notes, the Permian Basin holds nearly three times the recoverable oil and gas resources as the Eagle Ford Shale, which is Chesapeake Energy's primary oil growth play. It's that oil-rich prize McClendon is after.

What's truly remarkable about the Permian Basin is just how much oil potential it possesses. Just last year, Pioneer Natural Resources estimated that the industry would recover 50 billion barrels of oil equivalent from the field. However, after another year's worth of horizontal drilling data, the company was able to substantially increase its estimate.

Looking ahead, Pioneer Natural Resources sees these two shale plays providing substantial growth for the industry. As the following slide shows, the company sees horizontal oil and gas production growing from a near flat start of less than a million barrels per day to upwards of 3.2 million barrels of oil per day in 10 years.

Source: Pioneer Natural Resources.

That growth will fuel substantial production and cash flow growth for Permian Basin-focused drillers. In fact, Pioneer Natural Resources sees the play doubling the company's production from 2013 levels by 2018.

Pioneer Natural Resources is not the only company that sees its production doubling over the near term. Smaller Permian Basin-focused driller Concho Resources (NYSE: CXO  ) recently made the decision to accelerate its drilling program to take advantage of its large acreage position in the Permian Basin. That new plan has Concho Resources on pace to double its production from 2013 levels by 2016. It's a similar theme with drillers all throughout the basin as horizontal drilling is turning out to be the game-changer that's reviving this legacy oil basin and turning it into an exciting oil growth play.

 


TOPICS: Business/Economy
KEYWORDS: conchoenergy; energy; mcclendon; oil; permian; permianbasin; pioneerresources; westtexas

1 posted on 06/10/2014 9:17:23 PM PDT by ckilmer
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To: ckilmer

Production keeps rising and so does the price. How can the supply and demand curves do that?


2 posted on 06/10/2014 9:19:48 PM PDT by Jack Hydrazine (Pubbies = national collectivists; Dems = international collectivists; We need a second party!)
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To: thackney; bestintxas; Kennard; nuke rocketeer; crusty old prospector

“Looking ahead, Pioneer Natural Resources sees these two shale plays providing substantial growth for the industry. As the following slide shows, the company sees horizontal oil and gas production growing from a near flat start of less than a million barrels per day to upwards of 3.2 million barrels of oil per day in 10 years.”
...............
2016-2020 production increases look like about 150,000 barrels @ day annually for the Permian basin.


3 posted on 06/10/2014 9:24:00 PM PDT by ckilmer
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To: thackney; bestintxas; Kennard; nuke rocketeer; crusty old prospector

so now with latest estimates— reasonable estimates for oil production growth per day for out years 2016-2020 look something like.

bakken 100,000 barrels @ day annual increase
eagle ford 100,000 barrels @ day annual increase
gulf of Mexico 100,000 barrels @ day annual increase
permian basin 150,000 barrels @ day annual increase
everywhere else 130,000 barrels @ day annual increase

This now raises annual oil production growth for out years 2016-2020 to roughly 580,000 barrels @day. This is still slower than years 2012-2015. But the final numbers may come in much higher. We’ll see.

Meahwhile the EIA is going to have to raise their estimates for the post 2015 period.


4 posted on 06/10/2014 9:32:07 PM PDT by ckilmer
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To: Jack Hydrazine

Production keeps rising and so does the price. How can the supply and demand curves do that?
...............
demand is rising faster—especially in places like India and China. But really, all over the world.


5 posted on 06/10/2014 9:35:44 PM PDT by ckilmer
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To: ckilmer
Okay. Never mind. I found the right graph that explains it.


6 posted on 06/10/2014 9:39:08 PM PDT by Jack Hydrazine (Pubbies = national collectivists; Dems = international collectivists; We need a second party!)
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To: Jack Hydrazine

I wonder how much that consumption would decline if we got our immigration under control?


7 posted on 06/11/2014 1:17:34 AM PDT by MSF BU (n)
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To: Jack Hydrazine
Demand keeps rising as well.


8 posted on 06/11/2014 4:42:38 AM PDT by thackney (life is fragile, handle with prayer)
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To: ckilmer

Excellent news bookmark.


9 posted on 06/11/2014 4:45:49 AM PDT by Jane Long ("And when thou saidst, Seek ye my face; my heart said unto thee, Thy face, LORD, will I seek")
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To: Jack Hydrazine

cool graphic.

I think production has moved up a bunch since 2010. I’m not sure where consumption is. It fell a for a couple years after 2010 but in the last year or so it has started to rise again.


10 posted on 06/11/2014 5:00:06 AM PDT by ckilmer
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To: ckilmer

U.S. Field Production of Crude Oil
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=M

U.S. Product Supplied of Finished Petroleum Products
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTPUPUS2&f=M


11 posted on 06/11/2014 5:04:47 AM PDT by thackney (life is fragile, handle with prayer)
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To: Jack Hydrazine

Production keeps rising and so does the price. How can the supply and demand curves do that?
....................
unlike natural gas — oil is highly portable. so oil prices are set world wide. That means that demand in india and china affects prices here.

As it happens demand for oil all over the world is exploding as more and more people enter the middle class.

There are few other countries raising their production. Most are at peak production. some have declining production. It will be another 5-15 years before US fracking techniques raise oil production significantly in other parts of the world.

As it happens the fracking revolution is a huge financial boon to the USA just when this country needed it.

fwiw the fracking revolution is currently adding about an extra 400 billion to the US economy and an extra 100 billion in federal tax receipts. In three years those numbers will go up to 1 trillion for the US economy and 200 billion for the federal government respectively.


12 posted on 06/11/2014 5:08:04 AM PDT by ckilmer
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To: thackney

U.S. Product Supplied of Finished Petroleum Products
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTPUPUS2&f=M
...............
Maybe I’m reading this wrong. But somehow I thought that US refiners had been getting around the US export ban on crude by refining a lot of oil into gasoline and shipping the gasoline over seas. That those gasoline exports had been rising.


13 posted on 06/11/2014 5:17:06 AM PDT by ckilmer
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To: ckilmer

At least US consumption is still dropping like a rock. It’s a good indicator of that awesome and thriving Obama economy!


14 posted on 06/11/2014 5:30:39 AM PDT by Jack Hydrazine (Pubbies = national collectivists; Dems = international collectivists; We need a second party!)
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To: ckilmer

That would not be included in those number.

US Product Supplied would only include domestic consumption, not exports.

While gasoline exports have increased:
U.S. Exports of Finished Motor Gasoline
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFEXUS2&f=M

We still import significant amounts of gasoline blending components, essential gasoline but not in finished recipe per specific local requirements.

U.S. Imports of Total Gasoline
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WGTIMUS2&f=4

When taken together, we are just reaching the break even point from being a net importer.

U.S. Net Imports of Finished Motor Gasoline
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFNTUS2&f=M

U.S. Net Imports of Gasoline Blending Components
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MBCNT_NUS-Z00_2&f=M


15 posted on 06/11/2014 5:31:56 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

Globally, yes. Within the US, no.

It’ll be interesting to see what happens here as countries start moving away from the US dollar when trading oil in other currencies.


16 posted on 06/11/2014 5:32:20 AM PDT by Jack Hydrazine (Pubbies = national collectivists; Dems = international collectivists; We need a second party!)
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To: Jack Hydrazine

At least US consumption is still dropping like a rock. It’s a good indicator of that awesome and thriving Obama economy!
................
I think the down draft of the first quarter was mostly weather related. The second quarter numbers are likely going to come in much higher.

In classical stock market theory falling transportation stocks precede a recession and a stock market fall. Transportation stocks are currently rising pretty smartly.

Why? Well the easiest thing to point to is the massive amount of oil that has to be shipped by rail. But also grain prices are high and crops are plentiful so a lot of grain has to be hauled as well.

Basically the coasts of the USA are doing only so so. But the center of the USA is going gang busters.


17 posted on 06/11/2014 5:35:52 AM PDT by ckilmer
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To: ckilmer

US oil consumption has been dropping since at least 2008.


18 posted on 06/11/2014 5:38:11 AM PDT by Jack Hydrazine (Pubbies = national collectivists; Dems = international collectivists; We need a second party!)
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To: Jack Hydrazine
At least US consumption is still dropping like a rock.

You must have a rock with some helium in it, nearly balancing out weight and lift.

Image and video hosting by TinyPic

Image and video hosting by TinyPic

Note the first graph is essentially refinery output, gasoline, diesel, jet fuel, etc. The second includes natural gas liquids and the like.

19 posted on 06/11/2014 5:38:40 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

The upper graph has it in decline whereas the bottom graph has leveled out.


20 posted on 06/11/2014 5:40:20 AM PDT by Jack Hydrazine (Pubbies = national collectivists; Dems = international collectivists; We need a second party!)
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To: Jack Hydrazine
Globally, yes. Within the US, no.

Oil is a globally, fungible commodity. We import nearly as much of it as we produce ourselves.

21 posted on 06/11/2014 5:41:24 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

22 posted on 06/11/2014 5:42:25 AM PDT by Jack Hydrazine (Pubbies = national collectivists; Dems = international collectivists; We need a second party!)
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To: thackney

When taken together, we are just reaching the break even point from being a net importer.
.................
thanks that clarifies it. and sharply drawn too.

And the ease with which you source these EIA graphs suggests you have been referencing them for more than 1 year. Correct?


23 posted on 06/11/2014 5:44:58 AM PDT by ckilmer
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To: Jack Hydrazine

Note the first graph is essentially refinery output, gasoline, diesel, jet fuel, etc. The second includes natural gas liquids and the like.

The bottom graph is not bottomed out, it is climbing.

2012 = 18,490
2013 = 18,887

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mttupus2&f=a

The top graph has started to climb as well, but not as much. Petroleum demand, with and without natural gas liquids, has begun to climb again in the US.

2012 = 16,161
2013 = 16,318

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mtpupus2&f=a


24 posted on 06/11/2014 5:45:56 AM PDT by thackney (life is fragile, handle with prayer)
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To: Jack Hydrazine

That chart stops short of the last 18 months or so, where growth has begun. It also is including natural gas liquids as oil.


25 posted on 06/11/2014 5:47:31 AM PDT by thackney (life is fragile, handle with prayer)
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To: ckilmer

more than 1 decade...


26 posted on 06/11/2014 5:48:27 AM PDT by thackney (life is fragile, handle with prayer)
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To: Jack Hydrazine; thackney

The upper graph has it in decline whereas the bottom graph has leveled out.
..................
The meaning here is that the use of oil as a transportation fuel is still in relative decline—albeit the rate of decline has slowed recently.


27 posted on 06/11/2014 5:54:55 AM PDT by ckilmer
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To: Jack Hydrazine; thackney

The upper graph has it in decline whereas the bottom graph has leveled out.
..................
The meaning here is that the use of oil as a transportation fuel is still in relative decline—albeit the rate of decline has slowed recently.
....................
thackney: whoops just saw your last post which does a better job.


28 posted on 06/11/2014 5:57:36 AM PDT by ckilmer
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To: ckilmer

No, take out the seasonal swings and you will more clearly see we have started to increase.

Gasoline:
2012 = 8,682
2013 = 8,774
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mgfupus2&f=a

On-Road grade diesel
2012 = 3,440
2013 = 3,553
U.S. Product Supplied of Distillate Fuel Oil, 0 to 15 ppm Sulfur
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=md0up_nus_2&f=a

Jet Fuel
2012 = 1,398
2013 = 1,419
U.S. Product Supplied of Kerosene-Type Jet Fuel
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mkjupus2&f=a


29 posted on 06/11/2014 6:05:59 AM PDT by thackney (life is fragile, handle with prayer)
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