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Texas Shows No Sign Of Slowing Production Growth

Midland Oil

(Click to enlarge)

The Chart above compares several different combinations of past (vintage) data to estimate output. The dotted line is based on the most recent 8 months (August 2016 to March 2017) of data saved from the RRC website, the blue solid line is based on the past 12 months of data, and the yellow line is based on the most recent 3 months of data.

Each estimate uses the most recent 24 months of data from each month. A significant change in the size of the correction factors began in August 2016, which is the basis of the 8 month Corrected estimate. Dean Fantazzini prefers a 3 month estimate and an estimate using all vintage data (see chart below), I show the 3 month and 12 month estimates for comparison to the 8-month estimate, I expect the final data will be somewhere in the range of the 3 month to 12 month estimate (or between 3 month and 8 month estimate from June 2016 to March 2017). Related: Goldman: OPEC Needs To Do More To Restrain Shale Oil

The annual rate of increase in Texas C+C output from Sept 2016 to March 2017 was 250 kb/d per year and average annual 2016 output was 3269 kb/d, if the linear trend continues through Dec 2017, then average annual Texas C+C output would be 3420 kb/d in 2017, about 150 kb/d higher than 2016. The increased rig count will likely lead to a larger increase in output, possibly 300 kb/d.

(Click to enlarge)

Dean Fantazzini’s estimate for Texas C+C, the natural gas estimate follows.

(Click to enlarge)

Using the 12 month Corrected estimate combined with Texas Railroad Commission data for the Permian Basin (Districts 7C, 8 and, 8A) and statewide crude plus condensate(C+C) output to find the percentage of Texas C+C produced in the Permian basin, I multiply the percentage by the corrected 12 month Texas estimate to find an estimate of Permian Basin C+C output.

(Click to enlarge)

From February 2015 to March 2017, the linear trend for Permian basin output has been an annual rate increase of about 154 kb/d each year, the rising rig count may result in a faster rate of increase in the second half of the year. A similar estimate was done for the Eagle Ford region (Districts 1-5), note that both these estimates include output from vertical wells and conventional reservoirs that may not be included in other estimates (such as the EIA’s tight oil estimate and the estimates at shaleprofile.com).

(Click to enlarge)

Eagle Ford output dropped sharply from 1866 kb/d in March 2015 to 1326 kb/d in August 2016, a drop of 640 kb/d in 17 months (an annual decline rate of about 450 kb/d per year), since that time there has been a gradual increase at a rate of 136 kb/d per year.

(Click to enlarge)

Average Eagle Ford C+C output was 1409 kb/d in 2016, if the annual rate of increase continues at 136 kb/d for all of 2017, then the average for 2017 would be 1430 kb/d, or nearly flat from 2016 to 2017.

The annual increase in average C+C output for the Texas Permian and Eagle Ford combined from 2016 to 2017 is likely to be between 200 kb/d and 500 kb/d with a best guess of 350 kb/d. Including the New Mexico Permian basin in the estimate would increase the best guess of the 2016 to 2017 average annual increase to 400 kb.

By Peak Oil Barrel

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