Lack of adequate pipeline capacity costing Permian Basin drillers significant dollars

Bloomberg/Fuel Fix:
More than $1 billion a day. That’s how much value a Permian Basin pipeline crunch wiped out from the explorers most focused on the booming U.S. shale region in two weeks.

Eight of the Permian’s so-called pure-play drillers lost $15.6 billion in combined market value in the 15 days through Tuesday, as shipping constraints devour the profit they can fetch for a barrel of crude. Parsley Energy Inc. shares wilted 16 percent in that time; Diamondback Energy Inc. has been defanged, down 18 percent.

As oil prices slumped over that span, their losses were far worse than declines for other producers -- including more diversified shale drillers Occidental Petroleum Corp. and EOG Resources Inc., majors like Exxon Mobil Corp. and Chevron Corp., as well as the S&P 500 energy index. They pared those losses a bit on Thursday, along with other energy stocks, as oil rebounded.

Even as production soars in the Permian, dwindling pipeline space and a rail and trucking shortage have raised shipping costs, boosting the discount producers in the region take to offload their oil. The bottleneck benefits refiners who can buy cheaper crude and pipeline owners with extra space, but it’s dragging down explorers.
Relief may not come until 2020, when new pipelines are expected to be up and running. For now, here’s a rundown of winners and losers amid the space crunch....
How did the pipeline companies miss the opportunity when it has been clear for some time that there would be significant amounts of oil being produced in the Permian Basin?  I suspect the downturn in the market may have had something to do with it.  It is also not clear what effect the anti-energy left abuses against pipeline companies may have had on investments.  The effect is being felt in a positive way in lesser fields that are closer to infrastructure with the Eagle Ford formation receiving significant attention as well as the Austin Chalk.


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