Source: Chesapeake Energy.
Posted on 06/10/2014 9:17:23 PM PDT by ckilmer
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.
Production keeps rising and so does the price. How can the supply and demand curves do that?
“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.”
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2016-2020 production increases look like about 150,000 barrels @ day annually for the Permian basin.
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.
Production keeps rising and so does the price. How can the supply and demand curves do that?
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demand is rising faster—especially in places like India and China. But really, all over the world.
I wonder how much that consumption would decline if we got our immigration under control?
Excellent news bookmark.
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.
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
Production keeps rising and so does the price. How can the supply and demand curves do that?
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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.
U.S. Product Supplied of Finished Petroleum Products
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTPUPUS2&f=M
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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.
At least US consumption is still dropping like a rock. It’s a good indicator of that awesome and thriving Obama economy!
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
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.
At least US consumption is still dropping like a rock. It’s a good indicator of that awesome and thriving Obama economy!
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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.
US oil consumption has been dropping since at least 2008.
You must have a rock with some helium in it, nearly balancing out weight and lift.
Note the first graph is essentially refinery output, gasoline, diesel, jet fuel, etc. The second includes natural gas liquids and the like.
The upper graph has it in decline whereas the bottom graph has leveled out.
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