By Mella McEwen | Midland Reporter-Telegram (Midland, Texas)
Permian Basin oil and gas activity shifted into a higher gear as 2014 reaches its midpoint, fueled by rising crude prices.
Karr Ingham, the Amarillo economist who prepares the Texas Permian Basin Petroleum Index, reported that the May index jumped from April to May and is 9.8 percent above May 2013 levels. He added that the region’s oil and gas economy has now seen unfettered growth for four-and-a-half years.
“Not that there was any indication oil and gas activity was slowing down or on the decline,” he said, “but we thought it had flattened. Now, clearly we’re seeing the impact of higher crude oil prices” fueled by tensions between Ukraine and Russia and unrest in Iraq.
Those higher prices immediately flowed through the Permian Basin oil and gas industry, sending the rig count for the three Railroad Commission districts that comprise the West Texas portion of the Permian Basin further into record territory.
Crude prices averaged $98.32 per barrel in May, up 7.5 percent from $91.43 last May and so far this year are averaging $95.49 per barrel, up 6.6 percent from $90.51 last year.
“With an additional $5” for crude prices, he said, “projects that were not economic are now economic and off we go.”
Ingham said the rig count in May averaged 460 rigs, up 16.2 percent from 396 last May, a new record level and higher than at any point since at least 1980.
“The April rig count had already passed a record and now it’s beyond that and beyond that some more,” he said. So far this year is averaging 424 rigs, up 7.9 percent from 393 last year.
After posting year-over-year declines in the first four months of the year, Ingham said the number of drilling permits issued in the Permian Basin soared 24 percent in May compared to last May. The Railroad Commission issued 1,098 drilling permits in May, up from 884 last May. For the year, the commission has issued 4,454 drilling permits, down 2.9 percent from 4,588 a year ago.
Permian Basin crude production continues to climb as a result of high drilling activity. Ingham reported May production volumes were 11.9 percent higher than last May and so far this year are 12.1 percent higher than a year ago.
The value of that crude production is also climbing because of higher prices. May’s crude production was valued at $3.19 billion, up 20.4 percent from last May’s $2.65 billion. For the year, Permian Basin crude is valued at $16.4 billion, up 19.5 percent from $13.77 billion in the same period of 2013.
Producers reported 1,490 oil well completions in May, down 16 percent from $1,774 last May. So far in 2014, producers have completed 9,030 oil wells, up 82.9 percent from 4,937 the previous year.
Natural gas activity is rebounding as prices strengthen. Natural gas prices averaged $4.54 per Mcf in May, up 11 percent from $4.09 last May and are averaging $4.66 so far this year, up 31.6 percent from last year’s $3.54.
Natural gas production volumes in May were 4.3 percent higher than last May and are 3.5 percent higher so far this year than last year. That production was valued at $437.1 million in May, up 15.7 percent from $377.7 million. Production so far this year is valued at $2.3 billion, up 36.5 percent from $1.73 billion in 2013.
Producers completed 14 natural gas wells in May, up 133.3 percent from six last May. They have completed 52 natural gas wells so far in 2014, up 36.8 percent from 38 last year.