Permian Basin Production and Looming Issues

Transcription

1 Permian Basin Production and Looming Issues T R I S H A C U R T I S, P R E S I D E N T A N D C O F O U N D E R, P E T R O N E R D S T R I S H P E T R O N E R D S. C O M F O R T H E E N E R G Y P O L I C Y R E S E A R C H F O U N D A T I O N., I N C. A P R I L 1 9, PETRONERDS LLC

2 PetroNerd: Source: Extraction rig, September 2017 PETRONERDS LLC

3 Podcasts PETRONERDS LLC

4 Completion Design Changes and the Impact of US Shale Well Productivity content/uploads/2017/11/oiespetronerds CompletionDesignandProductivity2017.pdf PETRONERDS LLC

5 Spud to Total Depth in Less than Three Days Extraction Oil and Gas, September 2017 PETRONERDS LLC

6 1/1/2000 6/1/ /1/2000 4/1/2001 9/1/2001 2/1/2002 7/1/ /1/2002 5/1/ /1/2003 3/1/2004 8/1/2004 1/1/2005 6/1/ /1/2005 4/1/2006 9/1/2006 2/1/2007 7/1/ /1/2007 5/1/ /1/2008 3/1/2009 8/1/2009 1/1/2010 6/1/ /1/2010 4/1/2011 9/1/2011 2/1/2012 7/1/ /1/2012 5/1/ /1/2013 3/1/2014 8/1/2014 1/1/2015 6/1/ /1/2015 4/1/2016 9/1/2016 2/1/2017 7/1/ /1/2017 Liquid Barrels Per Day/ Gas mcd/d Water Barrels Per Day Permian Basin Production 12,000,000 10,000,000 Water 15 mbd 16,000,000 14,000,000 12,000,000 8,000,000 6,000,000 GAS 9 plus Bcf/d 10,000,000 8,000,000 4,000,000 2,000,000 Oil 2.9 mbd 6,000,000 4,000,000 2,000,000 Total Liquid Production Total Gas Production Total Water Production PETRONERDS LLC

7 mcf/d Permian Problems With crude oil comes associated natural gas and produced water Gassy reservoirs can help drive oil production at least in the Permian s case. It isn t just the Permian that is the problem..gas EVERYWHERE Ultra Petroleum Pinedale, Wyoming High intensity completions have done wonders for oil production and even more for gas production (IPs and well productivity) Marcellus 12,000 10,000 8,000 6,000 4,000 2,000 Marcellus Reservoir Decline Curve 11,300 mcf/d Month Source: PetroNerds, DrillingInfo data PETRONERDS LLC

8 Permian Basin Geology and Stratigraphy The Permian hosts a vast amount of stacked payzones that are actively being drilled and further delineated for the best spacing and completion plans. Source: Concho Resources 2 nd Quarter 2013 Investor Presentation Source: PERMIAN BASIN PROVINCE (044) By Mahlon M. Ball PETRONERDS LLC

9 Still Early in the Game This is a highly layered mix of conventional and unconventional reservoirs. Intense layering Interbedded shales, sandstones, and carbonates The Permian Basin has a tremendous amount of potential in terms of stacked pay, but successfully developing these stacked payzones will take a lot of work and a lot of capital. Stringent leasing requirements in the Permian Basin often prevent optimal asset delineation Land rush, Wall Street push, and high acreage costs Now operators are trying to delineate, develop, and maintain leasing requirements all at the same time Cost inflation also causing problems with soo much activity in the Permian Local sand etc. Optimal spacing and completion design (frac) is key Still early in this ball game Inventory Well density, parent child problems, all coming into focus Source: Diamondback and Cimarex April 2018 Investor Presentations PETRONERDS LLC

10 Pioneer Then and Now Source: Pioneer Natural Resources Oct 2013 Investor Presentation Source: Pioneer Natural Resources April 2018 Investor Presentation PETRONERDS LLC

11 1/1/2000 6/1/ /1/2000 4/1/2001 9/1/2001 2/1/2002 7/1/ /1/2002 5/1/ /1/2003 3/1/2004 8/1/2004 1/1/2005 6/1/ /1/2005 4/1/2006 9/1/2006 2/1/2007 7/1/ /1/2007 5/1/ /1/2008 3/1/2009 8/1/2009 1/1/2010 6/1/ /1/2010 4/1/2011 9/1/2011 2/1/2012 7/1/ /1/2012 5/1/ /1/2013 3/1/2014 8/1/2014 1/1/2015 6/1/ /1/2015 4/1/2016 9/1/2016 2/1/2017 7/1/ /1/2017 Barrels Per Day Well Count Horizontal Liquid Production 3,500, ,000 3,000, ,000 2,500,000 2,000,000 1,500,000 1,000, , ,000 80,000 60,000 40, ,000 20,000 Horizontal Well Count Vertical Well Count Total Liquid Production Horizontal Liquid Production Vertical Liquid Production Source: PetroNerds, DrillingInfo data PETRONERDS LLC

12 1/1/2000 2/1/2001 3/1/2002 4/1/2003 5/1/2004 6/1/2005 7/1/2006 8/1/2007 9/1/ /1/ /1/ /1/2011 1/1/2013 2/1/2014 3/1/2015 4/1/2016 5/1/2017 1/1/2000 2/1/2001 3/1/2002 4/1/2003 5/1/2004 6/1/2005 7/1/2006 8/1/2007 9/1/ /1/ /1/ /1/2011 1/1/2013 2/1/2014 3/1/2015 4/1/2016 5/1/2017 Liquid Barrels Per Day GAS mcf/d Barrels Per Day OIL Barrels Per Day WATER Associated Gas and Produced Water GAS Horizontal vs. Vertical WATER Horizontal vs. Vertical 3,000,000 2,500,000 2,000,000 7 Bcf/d 8,000,000 7,000,000 6,000,000 5,000,000 3,000,000 2,500,000 2,000, mbd 12,000,000 10,000,000 8,000,000 1,500,000 1,000, ,000 4,000,000 3,000,000 2,000,000 1,000,000 1,500,000 1,000, ,000 6,000,000 4,000,000 2,000,000 Horizontal Liquid Production Vertical Liquid Production Horizontal Liquid Production Vertical Liquid Production Horizontal Gas Production Vertical Gas Production Horizontal Water Production Vertical Water Production Source: PetroNerds, DrillingInfo data PETRONERDS LLC

13 Gas to Oil Ratio in the Permian Basin Source: PetroNerds, DrillingInfo data PETRONERDS LLC

14 API Gravity in the Permian Basin Source: PetroNerds, DrillingInfo data PETRONERDS LLC

15 1/1/2010 3/1/2010 5/1/2010 7/1/2010 9/1/ /1/2010 1/1/2011 3/1/2011 5/1/2011 7/1/2011 9/1/ /1/2011 1/1/2012 3/1/2012 5/1/2012 7/1/2012 9/1/ /1/2012 1/1/2013 3/1/2013 5/1/2013 7/1/2013 9/1/ /1/2013 1/1/2014 3/1/2014 5/1/2014 7/1/2014 9/1/ /1/2014 1/1/2015 3/1/2015 5/1/2015 7/1/2015 9/1/ /1/2015 1/1/2016 3/1/2016 5/1/2016 7/1/2016 9/1/ /1/2016 1/1/2017 3/1/2017 5/1/2017 7/1/2017 9/1/ /1/2017 1/1/2018 Barrels Per Day Production by API Gravity 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , Source: PetroNerds, DrillingInfo data PETRONERDS LLC

16 BARRELS PER DAY Permian Basin Decline Curve MONTH # of Wells Included in Month , , , , , Source: PetroNerds, DrillingInfo data PETRONERDS LLC

17 1/1/08 8/1/08 3/1/09 10/1/09 5/1/10 12/1/10 7/1/11 2/1/12 9/1/12 4/1/13 11/1/13 6/1/14 1/1/15 8/1/15 3/1/16 10/1/16 5/1/17 1/1/08 9/1/08 5/1/09 1/1/10 9/1/10 5/1/11 1/1/12 9/1/12 5/1/13 1/1/14 9/1/14 5/1/15 1/1/16 9/1/16 5/1/17 BARRELS PER FOOT FEET Measuring Productivity First 6 Month Cumulative Production Per Lateral Foot 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Average Lateral Length Source: PetroNerds, DrillingInfo data PETRONERDS LLC

18 BARRELS PER DAY Bone Spring Reservoir Decline Curve 1, MONTH Source: PetroNerds, DrillingInfo data PETRONERDS LLC

19 Top Permian Basin Operators by Production Operator Daily Liquids b/d Daily Gas mcf/d 1 OCCIDENTAL ENERGY COMPANYINC. 276, ,347 2 PIONEER NATURAL RESOURCES COMPANY 210, ,204 3 CONCHO RESOURCES INC. 197, ,170 4 EOG RESOURCES INCORPORATED 131, ,233 5 APACHE CORPORATION 102, ,368 6 EXXON MOBIL CORPORATION 91, ,160 7 ANADARKO E&P ONSHORE LLC 88, ,583 8 DIAMONDBACK E&P LLC 83, ,888 9 CHEVRON U.S.A. INC. 82, , ENCANA CORPORATION 72, , PARSLEY ENERGY OPERATIONS LLC 71, , ENERGEN CORPORATION 68, , CIMAREX ENERGY COMPANY 64, , KINDER MORGAN INCORPORATED 51, , RSP PERMIAN LLC 49, , MEWBOURNE HOLDINGS INC 48, , RD SHELL 47, , DEVON ENERGY CORPORATION 45, , SURGE OPERATING LLC 44,011 42, SM ENERGY COMPANY 40,563 73, LAREDO PETROLEUM INC. 37, , CENTENNIAL RESOURCE PRODUCTION LLC 35,086 81, RKI EXPLORATION & PRODUCTION LLC 35, , JAGGED PEAK ENERGY LLC 30,546 50, ENDEAVOR ENERGY RESOURCES LP 30,464 63,261 Source: PetroNerds, DrillingInfo data PETRONERDS LLC

20 Why Everyone Now Cares about Basis Swaps Operators can protect themselves against capacity constraints for both oil and gas through outright derivative hedges as well as basis swaps. Flurry of investor concerns about capacity constraints. PETRONERDS LLC

21 Midland Basis Swaps: Q vs Q Source: PetroNerds, HedgeAware. Survey of 41 publicly traded E&Ps. PETRONERDS LLC