Total hydrocarbon production in the Permian Delaware Basin, the top-producing play in the Permian, will hit a record 5.7 million barrels of oil equivalent per day (boepd) average in 2022, according to Rystad Energy research. Spurred on by high oil prices and appealing well economics, total production is set to grow by around 990,000 boepd, almost half of which – 433,000 boepd – is new oil production.
Investments in the basin are also expected to jump, surging more than 40% from 2021 levels to reach $25.7 billion this year. A significant contributor to this growth is the majors – ExxonMobil, Chevron, BP and ConocoPhillips – who last year cut Permian Delaware investments by 33% vs. 2020. This year, the majors are expected to raise investments in the basin by 60%, bringing their total to $7.4 billion. Private operators’ share is also set to balloon in 2022, rising 50% from $5.8 billion in 2021 to nearly $9 billion in 2022. Cost inflation on the services side, which is expected to range between 10% and 15% this year, is also a contributor to the higher spend levels.
The operator-specific findings are based on Rystad Energy’s research of a peer group of 61 operators in the basin. The forecasts are based on a scenario in which West Texas Intermediate (WTI) oil futures averages $106 per barrel in 2022 before dropping to $70 per barrel next year and to $50 per barrel towards 2025.
“The Permian Delaware has emerged as the top oil-producing play in the US shale patch, outpacing growth in other oil-rich regions. With oil prices expected to remain elevated, 2022 promises to be another outstanding year for production growth in the region,” said Veronika Meyer, Rystad Energy vice president.
Private operators will be a significant driver of the record growth as they have reacted quickly to the elevated market, increasing activity and output. Private companies more than doubled their collective rig count in the basin, from 30 to 73 in a little over a year, between January 2021 to April 2022. Private players are also less focused than their public counterparts on well optimization and environmental objectives – such as cutting flaring levels – which have emerged as significant play-level trends in recent years.
This production growth may seem like a reaction to the U.S. government’s call for increased supply, but most of the drilling and capital expansion was already guided by the companies at the end of 2021, before Russia’s invasion of Ukraine. Public operators have been reluctant to chase higher production growth and remain focused on capital discipline in the face of cost inflation and labor and equipment shortages.