Permian Basin activity could mean a hundred new wells by summer of 2017

In most U.S. shale oil regions, energy firms are making strategic but cautious bets as the price of oil holds above $50 a barrel.

Here in the Permian Basin of West Texas, the largest U.S. oil patch, the industry poured more than $28 billion into land acquisitions last year - more than triple what they spent in 2015.

Those deals set the stage for much larger investments needed to extract the oil from the ground - and they illustrate how the Permian Basin has become the epicenter for the U.S. shale resurgence after a historic oil price crash.

"We could easily see an extra 100 rigs out here in the Permian by June," said Josh Clawson of Gesco, a Midland, Texas, electrical contractor for oil drilling rigs.

That doesn't necessarily mean the investment blitz will extend to other U.S. oil regions. The industry's focus on the Permian reflects the simple math of profitability and a complex set of geographic advantages and technological advances that make it cheaper to drill here than in other major U.S. oil regions.

Permian Basin producers make money at the current crude price of about $53 per barrel because of the region's sprawling pipeline network, abundant labor and supplies, and warm winters that allow year-round work.

Most of America's shale industry needs prices above $60 a barrel to justify new projects and expansion. Oil has not hit that price since June 2015.

So at least for now, the Permian accounts for a disproportionate share of the industry's recovery. The amount spent on Permian land purchases and leases last year represented 39 percent of all deals nationally and tripled the activity seen in any other major U.S. oil region.
Some producers were making money at $40 a barrel for oil.  The Permian has several profitable layers to it that can be reached from the same well site.  I think it was largely responsible for breaking OPEC's market share play and forcing the cartel to cut back production to save itself.


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