The economics of Oil & Gas production vary by region. Mercer Capital focuses on trends in the Eagle Ford, Permian, Bakken, and Marcellus and Utica plays. The cost of producing oil and gas is determined by the reserve’s geological makeup, depth, and the cost of transporting raw crude to market. Depending on these factors, we can see different costs in different regions. We take a closer look at the Permian in this post.
Production growth in the Permian continued to exceed growth in the Eagle Ford, Appalachia, and Bakken over the past year as the basin remains one of the most economical regions in U.S. energy production. With the surge in commodity prices over the past quarter, it might have been expected that producers would start bringing more rigs online, leading to more production growth than what we saw. However, as upstream companies have signaled, it may not be realistic to expect such increased deployment of capital from public operators in the near future, though private operators may very well move to take advantage of the higher price environment. With greater emphasis on returning cash to shareholders, continued levels of relatively low investment in growth capital may be expected. However, its significantly large contribution to total energy production continues to make the Permian a steady source of growth for overall U.S. oil and gas production.
