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Crude Production Soars in Texas

David Becker
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www.iforex.com
Crude Production Soars in Texas

Crude oil production in the US continues to grow but in the first quarter, fields in Texas rather than many of the newer fields in North Dakota drove the increases. The Permian Basin, a long time oil- and natural gas-producing region in West Texas and southeastern New Mexico, has seen a significant increase in horizontal oil-directed drilling activity over the past five months.

This trend began at the start of 2013, and accelerated from the week ending on December 27, 2013, to the week ending on May 9, 2014. During this time, the number of horizontal, oil-directed rigs in the Permian Basin rose by 63 rigs, 50% of the total increase in the United States. This growth was heavily concentrated in counties in the Permian Basin containing formations with high production potential.

Horizontal oil-directed drilling rigs are primarily used to drill wells that produce oil from tight, low-permeability formations. The change in the number of oil-directed horizontal rigs in the Permian Basin does not necessarily mean that it will have a commensurate change in overall oil production. However, it does demonstrate that producers have been drawn to the potential for new production from its tight oil formations, which are stacked in multiple layers.

A change in the horizontal, oil-directed rig count of the scale seen in the Permian indicates a significant rise in activity in its tight oil plays relative to recent developments in other major production areas. At the beginning of 2013, both the Eagle Ford Shale in South Texas and the Williston Basin in North Dakota and Montana, which contains the Bakken Shale, exceeded the Permian Basin in the number of oil-directed horizontal drilling rigs.

By the end of 2013, the Permian Basin’s 215 rigs surpassed both the Eagle Ford and Williston Basin, which had 173 and 164 rigs, respectively. During the first quarter of 2014, the increase in oil-directed horizontal rigs in the Permian Basin was more than four times the combined increase in the Eagle Ford and Williston Basin.

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