According to oil and gas producers
How long and how low the slide in crude prices will go remains unclear, but prices lingering in the $80 range should support a continued boom in the Permian Basin, according to oil and gas producers, analysts and investors speaking at Hart Energy’s 2014 Executive Oil Conference in Midland Tuesday.
Tuesday saw a West Texas Intermediate crude price of $77.54 per barrel, reflecting about a 28 percent drop this year. Meanwhile, a group of 10 publicly traded companies focused purely on exploration and production in the Permian Basin have seen an average 22 percent drop in their stock prices this year, according to Tudor, Pickering, Holt and Company, a Houston firm focused on the oil and gas industry.
But the Permian Basin boasts a number of advantages over other oil production areas — more productive zones of earth, people drilling more productive wells per lease and various well completion efficiencies that companies are finding, some of which were discussed at the conference. That creates incentive to produce in the region even as the rig count may fall and producers may scale back on fringe exploration in favor of proven areas at the core of the oil plays.
“Lower oil prices do in fact impact absolute economics — no surprise there — but they don’t actually change the relative economics between oil plays,” said Travis Nichols, director of investment banking for Tudor, Pickering, Holt and Company. “And as I look at the Permian, producers are well positioned with among the highest break even points.”
The slide in oil prices followed signs from Saudi Arabia that the Organization of Petroleum Exporting Countries at a Nov. 27 meeting will cut prices instead of production in the face of global oversupply and demand weaker than expected.