Well There You Have It, More Permian Power


US land rig count has been steadily growing the past few months, exiting 2016 with 635 active rigs, but well short of the 1,860 active rigs in November 2014 when WTI was over $70. Rig activity has also become more concentrated into the most economical basins such as the Permian. Rig count in the Permian is still about 200 below 2014 levels but this metric may be misleading as it relates to future production. First, drill times have been drastically reduced. For example, seven more horizontal wells were drilled in December 2016 than December 2014 with 93 fewer rigs. Secondly, IP rates in the Permian have significantly increased. Gas IP rates have gone from an average of 811 Mcf/d in 2014 to 1,128 in 2016 and crude has grown from 382 b/d in 2014 to 560 b/d in 2016. Growing rig count, lower drill times and higher IP rates will lead to significant Permian production growth going forward and there are a number of midstream players that will benefit. ETP, Targa and Western Gas Partners will see an uptick in G&P while Plains All American, Magellan Midstream Partners and Sunoco Logistics Partners will also see varying degrees of upside. These upsides and our Permian outlook are explored in depth in EDC’s Dirty Little Secrets report so be sure to get your copy. (Tickers: ETP, TRGP, WES, PAA, MMP, SXL)

About The Author Justin Carlson

I have over 10 years of experience in data analysis, research, and consulting across the energy sector. I currently serve as Vice President of Research and Managing Director at East Daley Capital, an energy assets research firm that is changing how investors look at midstream energy risk with an asset-driven information service that combines proprietary research with a trusted team of unbiased, experienced energy analysts. My insights and analysis bring greater transparency to the energy financial market by quantifying potential risks by asset and enabling investors to make more informed and accurate projections and investments. Prior to joining East Daley Capital, I was a senior manager at Platts, a division of McGraw Hill Financial, which acquired Bentek Energy, where I was a senior member of the leadership team.