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The slowdown of the Perm could start in 2020



The Perm basin was by far the largest source of US production growth as field oil production increased from 1.2 million barrels per day (mmbpd) in January 2013 to over 4.2 mmbpd. In 2013, few observers (including myself) had expected the Perm to be as fast and as tall as he. However, the important question for energy investors at this point is how far and how fast the permian will expand in the coming years. Answering this question is key to future oil prices, since the permian engine of non-OPEC supply has been growth in recent years.

In this article, I will present a series of recent projections and observations from a number of independent experts, CEOs, mutual funds and research companies, where oil production could be in Perm (and the US) headed in the coming years. Suffice to say, the prospects for Permian and US shale growth are much more subdued than those we have seen in recent years.

Goehring & Rozencwajg

Goehring & Rozencwajg, arguably one of the smartest commodity investment funds, posted the following comments in their report on commodity markets for the second quarter:

The Permian should be his Increase production by another 2 MB / day before reaching a peak of 6.5 MB / day between 2029 and 2032 While this growth is impressive, it represents only a growth of ~ 200,000 b / d per year far below the annual growth of ~ 700,000 b / d in the last two years.

G & R For the entire US slate production it continues:

We assume that the three large US slate basins between 2027 by another 2.7 to 2, 9 mb / d will grow before reaching a high of about 1

0 mb / d and 2029. This corresponds to somewhere between 275.00 0 and 360 000 b / d growth per year, compared to almost 1 mb / d annually Growth from the three basins every year between 2017 and 2019. We should point out that these figures could be slightly higher in the early years and actually grow by more than 700,000 b / d from 1 January to 31 December 2019 could be recorded. However, we believe that 2019 will be the last time growth exceeds 500,000 b / d as production slows dramatically.

G & R reached its conclusions by applying its own neural network. G & R's neural network has demonstrated impressive accuracy in tracking historical US shale growth. G & R's strong track record and flawless research is in line with the subdued growth forecast for US shale (including Permian).

[Click to enlarge]

Rystad Energy

Rystad Energy firmly believes in the US shale revolution, and the consulting firm has done an outstanding job to understand the underlying trends driving US shale oil supply growth. Recently, the consulting company published a revealing diagram of the horizontal productivity of perm holes:

(Click to enlarge)

Using the data in the above diagram, I have created a new chart showing the Change from last year in Perm holes shows productivity (oil content) relative to WTI:

(Click to enlarge)

The Rystad productivity data show a marked slowdown in horizontal well productivity over the year, while productivity YoY growth in Q1 / 19 slowed by up to 28% YoY In Q1 / 16, growth slowed to 10% YoY in Q1 / 19. In fact, productivity growth in most of 2017 and 2018 moved between the negative and low single digits. If we look at the changes in productivity of perm-boreholes relative to WTI, we can conclude that a high degree has played a key role in making drills by the operators their best acreage in times of falling prices, while in times of lower prices do the opposite (this observation was also confirmed by Rystad Energy). It is clear that the productivity improvements in horizontal drilling in Perm since Q2 / 16 have largely come to a standstill, and productivity has increased only 6.7% in the 2.5 years since then. Regarding the growth of US slate production (including the Permian) in the coming years, Rystad Energy has recently said:

Although the volume of light oil production from US shale continues to grow, expansion is expected to slow Slight oil additions decline around 2023 due to a shallow development in drilling and completion activity.

(Click to enlarge))

Wood Mackenzie

Wood Mackenzie, another respected one Oil and gas consulting, with similar trends such as acceleration in take-off rates, pipeline constraints and increasing production volumes Permian long-term production potential. The consulting firm estimates that the average initial production rate for the Midland Basin drilled Wolfcamp wells has decreased this year by 6 percent, along with productivity reductions seen on numerous banks. More from MRT:

"Each piece will eventually grow," said Ryan Duman, Senior Analyst at Wood Mackenzie in an email. "As more wells are drilled and the core inventory is depleted, it becomes increasingly difficult to increase production," he wrote from Denver, discussing challenges to produced water in the Permian. "Normally, the slowdown in production growth or the total decline in production will result in a" mature "game status, the Permian is not there yet, but as more wells are drilled in the coming years, we are approaching a more" mature "status Further delineating new ones Zones or regions can dramatically slow down the maturity of the game. "

Wood Mackenzie's recent comment on the slowdown in the Permian period reflects a June 2018 study in which the company noted an acceleration of the final decay rates for the horizontal perm holes:

The study found that the most active Wolfcamp subpleas after five years of production have an annual rate of decline that is about twice that of the commonly used proxy value of 5% to 10%. The most common value for terminal waste actually observed in Wolfcamp's mature horizontal wells was 14%. The report analyzed the impact of more plausible downturn rates for terminals and noted that in a 14% drop in terminals scenario, short term effects on total perm supply are relatively low, but by 2040 there is a risk of nearly 800,000 barrels / day exists for the Perm production.

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Scott Sheffield of Pioneer Natural Resources chooses

In In a recent teleconference, Scott Sheffield, CEO of Pioneer Natural Resources, commented on his assessment of future supply growth in Perm as follows:

I reduce my expectations of the Permian and reach one million barrel per year annual growth Oil per day as in 2018. I still believe that the Permian in the Midland Basin, the only growing basin in the US since 2025, will reach 8 million barrels a day at a much slower rate. The Delaware is aggressively drilled by many other operators. Rig Count and Tier 1 acreage are depleted very quickly. In similar reports, Delaware peaked in 2024 due to the aggressive drilling and drilling distances, as companies essentially run out of inventory. The same reports show that the Midland Basin will not reach its peak until the mid-2030s.

The above statements are not worth while for Mr. Sheffield, who in 2013 determined that the ] Sperry Wolfcamp could potentially become the largest oil and gas discovery in the world .

[Click to enlarge] [194559002] Mark Papa (former CEO of EOG) Skepticism

In a recent teleconference, Mark Papa , CEO of Centennial Resources (former CEO of EOG and one of the famous US shale pioneers) to say this about the growth of the US oil supply in 2020:

I already realize that the entire Oil growth in the US in 2020 will be well below the 1.2 million barrels per day year on year, as most people currently forecast

It is worth noting that Mark Papa earlier this year, his skepticism towards Expressing the ability of the US shale industry To achieve the same productivity growth as in the past:

"I am not particularly optimistic that the industry will improve over the next 5 years We've delivered good results over the last 10 years, "said Mark Papa, CEO of slate producer Centennial Development Resources, which is backed by private equity. Daddy said the two biggest factors involved are frac hits or the disruption of the parent-child well and a shrinking stock of high-quality drill holes.

Concho Resources Failed in Distance Experiment [19659002] On August 1 Concho reported a disappointing result for their Dominator Down-Spacing experiment in the Delaware Basin:

Im Delaware Basin, the 23-hole Dominator project was developed to test logistical capabilities and well spacing that was approximately 50% narrower than our current resource estimate. While the initial rates were solid, recent performance data suggests that we've developed the Upper Wolfcamp too tightly.

Concho's failed experiment on this day led to a significant 22% drop in the stock price. This also led to questions regarding the growth potential of Perm (and US shale) Goldman Sachs:

"Unfavorable distance tests and under-forecast capital efficiency raise legitimate questions as to whether we are on the way to a later Timing Slate is no longer so relevant to global supply growth, "wrote Goldman Sachs analysts in a note. The investment bank said that a poor result from Concho provides evidence that the stock of remaining drill sites is "no longer rising and no longer sinking." This could also be an indication that capital efficiency is declining, which could mean that utility costs could rise in the future.

HFI Research

In a recent article, HFI research vigorously warned of the productivity and future growth of Perm:

We see how that Perm Basin comes to a halt, While we continue to assume that the Perm will make the biggest contribution to growth in the future, the speed and pace of growth will gradually weaken. According to our estimate, the Permian does not change significantly When oil production is completed, production growth will increase until 2023/2024.

Conclusion

It is important to note that Permian oil production will continue to rise for many years, as the super majors such as Exxon and Chevron continue to invest heavily in the basin and the fracking pace in the field continues to break records. However, the warnings of the many experts and professionals highlighted in this article are clear: Perm productivity and growth are already slowing down and will slow down significantly in the coming years. A slowdown in a single oil field in a single country may not seem essential to some, but if one learns that the US has contributed nearly 100% to the growth of non-OPEC production since 2015, and the lion's share of that growth comes from the Perm, a The significant slowdown in the Permian economy will have a disproportionate impact on global oil prices over the next decade.

By Nawar Alsaadi for Oilprice.com

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