You’ve probably read or heard that rig counts are increasing especially in the Permian Basin. It’s been the only shale basin that has seen such a big rig count. Pioneer has been leading the way in the Permian. Now it looks like Pioneer could be doing it for the next 100-150 years.
Pioneer Natural Resources is well-positioned to remain active in the oil-rich Permian Basin for very long time.
The company, based in Irving, Texas, intends to be drilling for oil in West Texas and New Mexico for 100 to 150 years, soon-to-depart CEO Scott Sheffield recently told the media.
The Permian Basin, the new U.S. shale oil hot spot, could see oil production jump by 300 million barrels per year: from 2 million barrels of oil per day in 2016 to 5 million barrels of oil per day in 2025, according to estimates.
The Permian Basin represents a $26 billion enterprise value to Pioneer and could provide 10 billion barrels of oil for Pioneer, the company says.
The company is focusing on the Midland Basin’s Spraberry/Wolfcamp area around Midland, Texas, part of the overall Permian Basin.
Production there has grown by 850,000 barrels of equivalent per day since 2009 to 1.1 million BOEPD, especially with horizontal drilling starting in 2012.
The company is No. 1 for drilling rigs in the Permian Basin and is No. 3 for Permian production.
Pioneer has likened the Permian Basin to the No. 1 oil formation in the world: the Ghawar in Saudi Arabia with its 160 billion barrels of reserves.
The Permian Basin has produced about 35 billion barrels of equivalents in the last 90 years with about 150 billion barrels of reserves remaining in the Permian with its Midland and Delaware basins, according to estimates.
The Permian Basin is the only U.S. oil shale to increase its production since the economic downturn in 2014-2015. The Bakken and the Eagle Ford both have declined.
Pioneer is increasing the number of rigs in the northern Permian Basin from 12 to 17 in the second half of 2016.
Today the Permian Basin accounts for about 50% of U.S. horizontal oil rigs, up from 15% five years ago. It is a place with more than 20 drillers active.
Pioneer intends to put 230 wells into production this year in the Spraberry/Wolfcamp area.
In 2015, the company put 197 horizontal wells into production.
The company put 69 wells in the Spraberry/Wolfcamp into production in second quarter and expects to add 50 wells there to production in the third quarter.
It is spending $1.9 billion in 2016 planned capex in the Permian Basin alone.
Those additional rigs will have little impact on production numbers until 2017, the company said.
In the second quarter, Pioneer saw production of 233,000 barrels of oil equivalent per day. That was 58% oil, 24% natural gas and 18% natural gas liquids, the company said.
It is projecting a 12% to 13% production growth in 2016, the company said in an August report to investors.
Pioneer says it is projecting a 30% to 35% in oil production increase in the Spraberry/Wolfcamp in 2016.
The company is predicting a jump in overall 2017 production between 13% and 17%.
The company had acquired 800,000 acres in the Permian Basin in deals going back to the 1980s and 1990s. The formation was first drilled in the 1920s.
Pioneer started looking in 2009 at developing the Permian Basin because of its oil potential.
The company has more than 10,000 drilled wells and 4,000 workers. Its stock has done very well with an average 34% increase annually over the last seven years.
Last June, Pioneer spent $435 million to acquire 28,000 acres in the Permian’s Midland Basin from Oklahoma-based Devon Energy.
Sheffield is set to retire at the end of 2016. He will be replaced by COO Timothy Dove.
An affiliation of 13 states, led by West Virginia, sued the Environmental Protection Agency on Tuesday over its regulations for oil and gas, calling the rules a “job-killing attack” on the nation’s oil and natural gas workers.
The lawsuit, filed in the D.C. Circuit Court of Appeals (reviewed by Kallanish Energy), asks the court to examine EPA’s rule regulating methane emissions from new, reconstructed and modified oil and gas wells that use hydraulic fracturing (fracking).
“Petitioners will show that the final rule is in excess of the agency’s statutory authority and otherwise is arbitrary, capricious, an abuse of discretion and not in accordance with law,” according to the filing. “Accordingly, petitioners ask the court to hold unlawful and set aside the rule …”
The states argue the regulations impose an “unnecessary and burdensome” standard on the oil and natural gas industry, “while setting the stage for further limits on existing oil and gas operations before President Obama leaves office.”
“These rules will cause West Virginia coal miners to lose their jobs and West Virginians’ electricity bills to skyrocket,” according to West Virginia Attorney General Patrick Morrisey. “EPA’s actions will upset the careful balance of ensuring reliable, affordable electricity while encouraging job growth and responsible protection of the environment.”
The states argue the regulations “would raise production and distribution costs and, in turn, force an increase in consumer utility bills” by making fuel costs higher for power plants increasingly dependent on low-priced natural gas.”
The EPA itself predicts its regulations will cost $530 million in 2025, while other studies project the annual price tag may reach $800 million.
In addition to West Virginia, the lawsuit includes attorneys general from Alabama, Arizona, Kansas, Kentucky, Louisiana, Michigan, Montana, Ohio, Oklahoma, South Carolina and Wisconsin, along with the Kentucky Energy and Environment Cabinet and North Carolina Department of Environmental Quality.