Daniel Jones: The Permian Is Reaching Its Limit (谈股论金)  498次阅读

作者: xiaosan , 发表于: 2017-05-29 (2725天前) @ 新东

Summary

In this article, I decided to look at some production trends from the Permian Basin, courtesy of the EIA.

What I found was that, while the rig count has soared and production is likely to grow further, this growth is coming at a cost.

With falling productivity rates and high decline rates, the impact of rig additions moving forward will be more limited, which is bullish for oil longs.

As energy prices have rebounded from their multi-year lows and now seem to be hovering in a range of between $45 and $55 per barrel, market participants are pointing to a massive increase in the rig count, primarily in the Permian Basin, as a sign that growing US production may offset OPEC and non-OPEC cuts. In what follows, I will dig into some data involving not just the rig count in the Permian but also data surrounding how effective those rigs are, and give my thoughts on what it means for investors in companies like Whiting Petroleum (NYSE:WLL), Chesapeake Energy Corp. (NYSE:CHK), Approach Resources (NASDAQ:AREX), and Legacy Reserves (NASDAQ:LGCY), as well as for the United States Oil ETF (NYSEARCA:USO) and other oil-related ETFs moving forward.

The Permian's rig count has soared

The fact of the matter is that, over the past several months, the rig count in the Permian has soared. As you can see in the graph below, for instance, the rig count has nearly tripled, rising from just 132 units at the low in April of last year to 362 units in operation as of May 26th. This data is courtesy of Baker Hughes (NYSE:BHI), which releases weekly rig count estimates for various oil and natural gas regions in the continental US.

As a result of this surge, oil production in the Permian has grown quite a bit. If the EIA's (Energy Information Administration's) estimates regarding the region are accurate, as reported by their Drilling Productivity Report, then oil production in the area grew from 1.986 million barrels per day in April of 2016 to an impressive 2.493 million barrels per day for June's estimates (the EIA forecasts one month ahead of their release). This increase of 507 thousand barrels per day represents more than 100% of the growth seen across the entire US (using weekly estimates) over a similar time frame.