Oil Majors Expect Permian Production Growth To Slow
By Charles Kennedy - Oct 31, 2022, 2:21 AM CDT
In their third-quarter reports, both Chevron and Exxon revised down their planned output from the Permian Basin.
Both companies reported record production in the third quarter, but they believe supply chain issues and a workforce shortage will slow growth.
As inflation rises and the number of drilled but uncompleted wells falls, production growth across the country will face headwinds
Two Big Oil majors have said they expect oil production in the Permian to rise by less than they had initially planned this year, suggesting industry problems are indeed serious enough to hold back production growth in the most prolific shale play in the United States.
In their third-quarter reports, Chevron and Exxon both revised down their planned output from the Permian, although moderately. Chevron said its Permian output had hit a record high in the quarter that just ended, at 700,000 bpd. Exxon also posted record production in the Permian, at 560,000 bpd for the third quarter.
Yet these figures are unlikely to change much for the rest of the year, due to the ongoing supply chain challenges in the industry and a continued workforce shortage, analysts have noted.
Oilfield services are also becoming more expensive as overall inflation spills everywhere but also as demand for their services increases amid the tight oil supply context. This has given the OFS sector more power over pricing which is not good news for their clients.
The Permian remains the star of the shale patch, with production expected to hit another record next month, at 5.453 million bpd, according to the U.S. Energy Information Administration.
Yet the statements by Exxon and Chevron add to concern that production growth even in the Permian is slowing down. The other indication that this may be the case is the declining number of drilled but uncompleted wells in the play. As of September, the number of DUCs across the U.S. stood at 4,333, which was the lowest since late 2013.
The decline was in big part the result of a surge in completions after the end of pandemic restrictions when demand for oil began to rebound fast. Yet new drilling was nowhere near pre-pandemic levels, so both DUCs and new well drilling declined, constraining production growth.