I assume by four main Permian "plays" Mr. Berman means four main benches, like the Lo. Spraberry, Bone Spring and Wolfcamp A and B. If production in the Permian is plateauing, its "rolling over." From growing like a house 'a fire since 2014 to going flat 2H24, thats "rolling over." Depletion doesn't happen over night, it happens over time. Whatever; lets don't start changing definitions again, please. That bullshit is getting old.
"Base + core" means current legacy production plus Tier 1/2 level locations left to drill in the core areas = 5 more years of plateau at current production rates. Core areas are Midland, Martin, Lea, Eddy counties, etc. Base + noncore means legacy production plus Tier 3/4 flank stuff, like Culberson, Pecos, Reagan and Glasscock counties, etc.
Actually this is not Berman's chart it's a chart from a paper written in 2021 by three University of Texas Petroleum Engineers, Wardana Saputra, Wissem Kirati and Tadeusz Patzek, Dr. Patzek is a man I have heard lecture several times, NOT a stripper well operator. and very smart. The paper is titled Forecast of Economic Tight Oil and Gas Production in Permian Basin, published in 2021. It can be found in SPE publications or MPDI. It was a good paper except it made some very incorrect assumptions about well economics. OIl prices today are the same as 2021, well costs, however, are up 30%. More on EUR assumptions, below.
From the paper itself...
As previously mentioned, in 2021 this paper clearly assumed well productivity and EUR's were going to increase because of longer laterals and more proppant loading per peforated foot.
From the paper:
"The newer wells yield significantly higher EURs due to longer laterals and bigger hydraulic fractures. However, in areas of poor reservoir quality, these advancements of completion technologies do not help much;"
With regard to EUR's, Berman himself concluded a year ago that longer laterals and more proppant loading per perforated foot had reduced the average EUR's in the Permian Basin by +/-25% the previous 4 years. Given the exponentially higher decline rates of longer laterals and in new frac designs (73% in the Midland Basin at month 13), I concur with this. Short term production went up but, then declined quickly, implied EUR's are falling.
With regard to the remaining number of wells to be drilled over the next 5-6 years to maintain a plateau, at current rig counts the Permian can only complete approximately 5,200 wells per year. Gassy oil wells are turning into oily gas wells and first year declines have increased since 2018-2019 at 47% to over 73% in 2024, basin wide. Costs are going up (25% tarriffs on steel!), profits will be going down. The Permian shale oil sector can only support a rig count of 300 without other people's money; it is adding more debt to the nine figure debt it already has just to pay dividends to investors. If FANG buys Double Eagle for $6.5B, its total long term debt will be a knat's ass below $20B and it will be paying close to a B a year in interest.
To the casual observer the Permian HZ play is doing fine and can keep 300 rigs running, no problem; I personally do not think so. If so, why all the M&A's? Past results are NEVER indicative of future performance in the oil and gas business.
For the record, current Permian production is 6.3 MM BOPD as a result of a massiive number of DUC completions in 2023 and big six month production numbers from longer laterals, more densely populated staging along that lateral and much bigger frac's. The annualized decline of that legacy production (6.2 MM BOPD) is 43%, or 2.58 MM BOPD. To maintain a plateau the Permian has to find and replace 2.58 MM BOPD, every year, for the next 6 years. That's a new 700 MM BO oilfield, per year...as big or bigger that lots new structures being found in Guyana off the east coast of South America !
And as to remaining drillable, Tier 1/2 locations in the cores, a big contention of the Saputra paper is infill drilling. I am not buying that, particularly in the Midland Basin where wells are already drilled on <600 foot spacing, GOR is threatening bubble point in entire counties (Midland, for instance, Martin, next!) and wells are interfering with each other. I therefore do not believe 35,000 additional wells can be drilled in the next six years that will add another 16-17 billion barrels of UR to current Permian totals...it will take many more wells than have previously been drilled.
We always drill and complete the best stuff first; its naïve to suggest the last 55,000 HZ wells drilled in the Permian will be better than the first 55,000, longer laterals or not. Look at at TRRC GIS map and find room for 2,000, 15,000 foot laterals in Permian Tier 1/2 cores. You can't do it. The greater efficiency, better technology sound bites are clearly proving to be just that, sound bites. That technology bullshit is getting REALLY old.
The heart of the Permian Basin watermelon has already been eaten. Henceforth new wells will be gassier, less liquids productive, be more expensive to drill and complete, have lower EUR's and be even less profitable, if that is possible. The amount of long term debt the Permian has to pay off, and the retirement/decommissioning of existing wells, pads, infrastructure and fee land is still in access of $200 B.
Where is all the money going to come from to keep drilling these expensive, marginally profitable wells?
I think Art tries to ride the fence. It kind of looks like a serpentine fence and every time the fence swerves Art has to balance a new issue : energy dilemma, Tucker Carlson, climate change, energy crisis, overpopulation, DJT, over consumption, GOP etc.
Last year, Art was almost epileptic when Doomberg proposed redefining oil to mean any molecule (oil, ngl, condensate, NG) that is processed in a refinery. It caused a lot of heartburn on OSB too.
The US is a twin deficit nation. The US spending deficit (7%) is greater than the GDP and the US current account deficit is, as of 3rd qtr 24, about $311 billion. These deficits affect interest rates and rising interest rates threaten a possible default on US government debt. Alternatively higher interest rates will make the USD stronger which makes US exports more expensive (which if this happened would also affect every state and municipal indebtedness also).
But I think Art understands that the US immediately needs a surplus energy account that can be exported. Perhaps this helps explain the Patzek and Suputra chart Art championed on Permian peak oil plateauing for another 15 years.
To close these deficits, Trump and Treasury Secretary Scott Bessent need to increase US GDP and exports and I think Trump and Bessent believe the quickest way to increase exports is with LTO and LNG. The US needs these exports to go to Europe and China
The US doesn't want Russian oil and NG or KSA or Venezuela oil to be bought by Europe or Asia. They want these continents to need USD so they can be sent back to the USA to help close the current account balance and service US debts and help pay for the re-shoring of American factories and jobs. We can't fight wars if artillery shells, steel, rare earth minerals are only manufactured in China.
I think this explains the NS 2 pipeline and the war in Ukraine and I think it explains Trump abandoning NATO and Ukraine and focusing on the Western hemisphere.
I think this explains why Trump and Bessent want US oil and natural gas to be cheap (He wants volume to make up for the cheap price) Trump doesn't care about the domestic US oil and gas industry. He cares about the USD (threats of tariffs), wall street, and US government dominance.
IMHO.
https://www.financialsense.com/podcast/21171/art-berman-drill-baby-drill-and-death-peak-oil?&utm_source=x&utm_medium=social-media&utm_campaign=addtoany
A note on post editing: I don't sit at a computer all day. I write stuff in a hurry before first light, then drive to consult on a well, or feed animals, or hit tennis balls, work on my book, whatever. I find mistakes, I change them. I think about what I have written and add to it, or delete from it. I get new input, I make changes; I try to get it right. I don't have editors. I take pride in my writing.
Its my obligation, so to speak, after 60 years in the business to try and tell the truth. Everything, I mean EVERYTHING you click on these days to find out more about about the oily world you live in you have to pay for. And there all, ALL of them, from whomever, just opinions. Usually money motivated.
My "opinions" after all these years as a producer, spending my own money, are free because of love and concern for my country's future.
I wrote up a linked in post just 2 days ago, continuing the topic of shale oil getting heavier in Permian. After 1 year, the oil probably even heavier now and more natural gasoline in gas stream.
https://www.linkedin.com/pulse/shale-tight-oil-getting-heavier-more-natural-gasoline-sheng-wu-mevfc/?trackingId=OzTIGNu%2BSQ%2BHMRz4KjIAYw%3D%3D
brookpe asked GPT, above, about the decline rate of the projected tails in the 2021 Saputra paper.
Back in the day the average Permian type well, whichever of the Big 4 benches you chose, had first 14 month declines of 47-50%. They were short lateral wells but efficiently frac'ed and EUR's, the DCA done at the right time in the production profile, were pretty fair. Early wells were drilled on reasonable spacing distances. Whoa Nellie there were lots of reserves booked in 2021, lots of that based on proximity PUD wells not even drilled, thanks to the SEC.
Then OPM started to wane, investors got pissed off, and highgrading began in earnest. In the Midland Basin they found they could pack those wells in the sweet spots on 550-600 foot spacing and make some quick cash. In 2021 the Permian drilled its most productive wells and the sector was quick to jump on the 1 MM BOE EUR bandwagon.
But there were domestic squabbles between children and parents, pressure depletion set in, GOR went up and liquids productivity went down. With all that, implied EUR's went down. Quietly, lots of reserve write downs occured and loan agreements re-done based on more accurate assets.
Squeezing longer laterals in between all those thousands of short laterals helped a lot, at first. Is still helping. IP60's got higher but then the same wells declined much faster, to 73% or more in the first 14 months. Implied EUR's from the new, longer-is-better mantra got lower, when done properly. At the right time.
Berman got it, for awhile. Now, no way liquids EUR's in Permian wells are going up...because of longer laterals. That is some dung heap that the sector and its pundits want you to believe to keep the party going. Exxon likes to say its EUR's are up. Phfttttt. Remember, the E in EUR stands for estimated.
Interesting that Chevron after reporting a 45% reserve replacement ratio today announced they're canning 15% to 20 of their global workforce. I think the world is sleepwalking into a big problem but I'm an oil bull so just talking my book.
Brooker, P.E.
Actual well productivity and implied EUR's are higher in the Permian than projected by Saputra etal. in 2021; 20,000 additional wells drilled since 2021 has increased production from 4.6 MM BOPD to 6.2 MM BOPD, YE2024. That changes the dynamics of a ten year plateau to get to 32.2 G BO, significantly, left. The above information begs the question, for this Saputra (Berman) contention to be correct, are 100,000 more wells going to get drilled out in goat pasture, far away from depleted cores in the Permian, that make 350 K BO EUR's each?
Mike,
Great article. Can you provide a bit of insight of what they were suggesting in that 2021 paper to reach 13 million barrels EUR per existing well by infill drilling?
Steve
Hello Mike,
to know the potential (number of wells) of the Permian I had fun making this table, but given the MPDI study I doubt about the density of wells (16 for the Wolfcamp, 12 Bonespring, 8 Spraberry)
I would like to know the real density,
if you can give your opinion Mike or the community.
For the prospective of the surfaces I rounded from 5% to 5%.
my sources are maps from Novi labs, Art Berman, VSO, David Hughes.
the number of wells are data from Novi dating from 2023
When things fail, people dabbling in abstractions voluntarily become pied pipers, and dabbling in more abstraction. When things fail and people are hands on, they just keep the habits and try to squeeze as much of what they are doing... These exact abstract people will be with hair on fire when oil production will be 25% lower blaming left and right being politically radical. He will blame Trump on turbo mode... Meanwhile people producing will keep on producing and be over-bussy with actual field problems. This situation might not be solvable at all that's why SPR and cutting exports was very important as you said for years now.