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The Texas Railroad Commission issued 1,310 new oil and gas drilling permits to shale producers last month, up from just 511 a year ago. Most of these were issued for the Permian, cementing further its top spot among most desirable drilling destinations in the shale patch.
However, as Reuters notes, the increase in permits went hand in hand with a decline in well completions: oil well completions were down 44 percent in March on an annual basis, to 533 wells, and gas well completions were down 60 percent to 77.
Texas currently sports the most active drilling rigs in the U.S., at 418 or half of the total, according to Baker Hughes data.
One industry insider from Texas told Reuters that the decline in well completions is no cause for alarm. Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, said that producers will amass drilled but uncompleted inventory of new wells and then start evaluating the viability of each on the basis of current oil prices, service costs, and output potential.
Texas produced a daily average of 2.43 million barrels of crude oil, the latest data for January shows. This is down slightly from last January’s 2.45 million bpd, but an increase later in the year seems to be on the cards, according to observers.
If the current oil price rally holds, this recovery will likely take place quickly rather than slowly. However, since it is based more on geopolitical factors rather than any major shifts in fundamentals, its sustainability is questionable.
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Meanwhile, the Permian continues to attract energy companies. The latest news in this respect was Chevron’s plan to start exploiting its acreage in the shale play – assets that the company has held for decades, but until now has not tapped, focused on the usual mega projects that used to make Big Oil’s living.
Now that the game has changed with prices lower for longer, even the biggest players are making themselves leaner, focusing on less capital-intensive, quicker-return projects, both in Texas and elsewhere.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.