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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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The Permian Oil Boom Isn’t Over Just Yet

  • Occidental's president and CEO, Vicki Hollub, asserts that the Permian still has significant oil to develop, disputing concerns about falling well productivity.
  • U.S. crude oil production forecasts show record outputs in 2023 and 2024, with the U.S. leading non-OPEC+ production growth.
  • Despite the shift towards capital discipline and focus on returns to investors, major U.S. producers like Occidental, Pioneer Natural Resources, ExxonMobil, and Chevron reported robust Permian production in recent quarters.
Permian

The Permian has more oil in place to allow output growth for the next few years, Occidental's president and CEO Vicki Hollub said this week, commenting on mounting concerns among analysts that well productivity in the top oil-producing U.S. shale basin is dropping off.   

"Well, we've seen continuing improvement in our oil well productivity and so we haven't seen a drop off," Hollub said at the ADIPEC energy conference in Abu Dhabi, as carried by Reuters.  

While there has been a degradation of productivity with some operators, the Permian "still has enough additional oil to develop that will continue to grow over the next few years," Oxy's Hollub said. 

The Permian and the rest of the U.S. shale basins are expected to see slightly lower oil production, by 40,000 barrels per day (bpd), this month compared to the estimated output of 9.433 million bpd in September, according to the EIA's latest Drilling Productivity Report

But the EIA slightly raised in September its projections for U.S. crude oil production this year and next—and expects annual output to set records in both years. U.S. crude oil production is seen averaging 12.78 million bpd in 2023 and 13.16 million bpd in 2024, up from 12.76 million bpd and 13.09 million bpd, respectively, in the August Short-Term Energy Outlook.  

The U.S. is also set to lead non-OPEC+ production growth, which is expected at 2 million bpd in 2023 and at 1.3 million bpd in 2024, driven by the United States, Brazil, Canada, and Guyana, according to the EIA.  

U.S. oil production will continue to grow, but at a slower pace than before, analysts say, as producers are much more focused on returning cash to investors than growing at all costs, as it was the case before 2020. 

Despite a falling rig count in America, some major U.S. producers reported record output in the Permian for the second quarter, while others raised their outlooks for year-on-year gains, thanks to more efficient operations. 

Occidental, for example, reported second-quarter production of 1.218 million boepd, which exceeded the mid-point of guidance by 42,000 boepd, and the company raised full-year production guidance to 1.21 million boepd.  

"Our team's technical achievements have positioned us for a strong second half of 2023, giving us confidence to raise full-year oil and gas production guidance," Hollub said in comments on the Q2 performance. 

Pioneer Natural Resources saw its Q2 oil production near the top end of the guidance range.

"Continued strong well productivity and highly efficient operations underpin our ability to increase full-year production guidance, while lowering full-year capital guidance through a purposeful reduction in activity," Rich Dealy, President and Chief Operating Officer, said. 

Supermajors ExxonMobil and Chevron both reported record-high Permian production for the second quarter. 

For everyone in the U.S. shale patch, discipline, efficiency, and returns to shareholders are now the name of the game. Even at $90 oil, producers are not responding with more drilling, as they would have done in the 2010s. 

Even with the inflation in some costs—including steel, tubulars, chemicals, and services—now showing signs of easing, U.S. companies are not changing their capital plans for the rest of 2023, Enverus said last month. 

U.S. oil production will still grow, but growth would be measured and more difficult, not only because of well productivity and shrinking Tier 1 acreage, but also because of the capital discipline and changed mindset of the operators. 

There is enough remaining drilling inventory across key North American shale plays despite the shrinking availability of Tier 1 acreage and the higher density in drilling locations, Enverus Intelligence Research (EIR) said last week.

"We see the cost of supply continuing to increase for North American shale producers over the next five years as the industry moves from developing Tier 1 to Tier 2-4 locations," Dane Gregoris, managing director at EIR, said. 

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"However, ample Tier 2-4 inventory should alleviate fears of a structural decline in North American production or activity levels over the next 15 years," Gregoris added. 

"It's not stagnation. Companies are still growing," Ryan Duman, a principal analyst with Wood Mackenzie's US Lower 48 Upstream research team, said in June.  

"It's just very different from what we saw in 2018. It's predictable, financially sustainable growth."

By Tsvetana Paraskova for Oilprice.com

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  • George Doolittle on October 05 2023 said:
    *"word-smithing"* doesn't really explain much of anything...if anything at all. What drives growth in energy production is not high prices...and the high costs associated with that...but very low prices and "economies." That's why it is absolutely dirt cheap natural gas that continues to be the driver of All Things Energy as they have been forced to make "the hard choices" since going on 2008 when prices peaked at an incredible $15.00 US Dollars per mcf. Because of the staggering volumes still being produced at prices ranging from $2.00 to $3.00 US Dollars per mcf this has lead to an entirely new energy industry to emerge far larger than the US oil industry...and far more economically dynamic and "growth positive" (again through very low prices and absolutely staggering volumes a "new economy" one that needs zero oil effectively be had.) This doesn't mean the United States now consumes de minimus oil quite the opposite with numbers reported at a staggering 16 plus million barrels per day for refining operations in the USA. But this "captured oil" now today still must be sold no different from a new car so both retail and distribution has very much changed as a consequence with the build out of absolutely *ENORMOUS* in size fueling stations most notably "Buc'cees" but from what I have observed anyways others now as well. Natural gas infrastructure now includes retail as well to include most spectacularly even rocket launch infrastructure for SpaceX's mighty Starship in Texas and the goings on in Florida at Cape Canaveral now. Production in Europe appears set to surge in and around the British Isles in response to Russian sanctions and of course both Canada and presumably at some point back to Alaska as well as was begun under the Trump Administration. Point being I agree the USA has become most expert at drilling for and getting oil and natural gas and as this moves to frontier areas such as Alaska, Canada, Guyana and "mental frontier" places such as USA Gulf of Mexico the "set up" for Wall Street traders to "make the money for investment purposes" (Morgan Stanley Money) is all very well kept at the moment. Long $ms Morgan Stanley, long $vlo Valero, long $meoh Methanex, long $shel former Royal Dutch Shell the list is endless at the moment in point of fact.

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