• 4 minutes Will We Ever See 100$+ OIL?
  • 8 minutes Iran downs US drone. No military response . . Just Destroy their economy. Can Senator Kerry be tried for aiding enemy ?
  • 11 minutes Energy Outlook for Renewables. Pie in the sky or real?
  • 23 mins Iran Loses $130,000,000 Oil Revenue Every Day They Continue Their Games . . . .Opportunity Lost . . . Will Never Get It Back. . . . . LOL .
  • 7 hours Renewables provided only about 4% of total global energy needs in 2018
  • 2 days Iran Captures British Tanker sailing through Straits of Hormuz
  • 2 hours Berkeley becomes first U.S. city to ban natural gas in new homes
  • 1 day EIA Reports Are Fraudulent : EIA Is Conspiring With Trump To Keep Oil Prices Low
  • 3 days Drone For Drone = War: What is next in the U.S. - Iran the Gulf Episode
  • 3 days Today in Energy
  • 11 hours Shale Oil will it self destruct?
  • 8 hours So You Think We’re Reducing Fossil Fuel? — Think Again
  • 1 hour N.Y. Governor Signs Climate Bill
  • 50 mins First limpet mines . . . . now fly a drone at low altitude directly at U.S. Navy ship. Think Iran wanted it taken out ? Maybe ? YES
  • 2 days Oil Rises After Iran Says It Seized Foreign Tanker In Gulf
  • 18 hours U.S. Administration Moves To End Asylum Protections For Central Americans
  • 3 days LA Solar Power/Storage Contract
Alt Text

Russian Crude Could Still Be Dirty By Mid-2020

Polish refiner PKN Orlen has…

Alt Text

Libya’s Oil Revenue Takes A Beating

Libya’s oil revenue fell significantly…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Is The Permian Starting To Get Crowded?

The first quarter of the year saw record-high oil and gas M&A activity in the U.S., with the value of deals topping US$73 billion – a whopping 160-percent annual increase and a record high. That’s what PwC reported, adding that most of these were in the upstream segment and that 20 of the 53 M&A deals were made in the Permian, cementing the play’s status as star performer of the U.S. oil patch.

The revival of M&A activity was a direct result of OPEC’s decision to start cutting production at the end of last year, but PwC also notes that the majority of deals were in fact asset sales, rather than corporate acquisitions. This means, according to the consultancy, that energy companies are being smart about optimizing the value of their production assets rather than just seeking to expand these as much as they can. And it seems that most of them are flocking to the Permian or expanding their existent footprint there.

One can’t help but wonder when the play will get crowded. In March alone, for example, the Texas Railroad Commission issued 1,310 new drilling permits. Most of these were for the Permian. The number is up more than twice from a year earlier, when the number of new permits was 511.

It seems obvious that the new administration’s markedly pro-energy business agenda has boosted optimism across the board, increasing risk appetite amid falling production costs and relatively stable international prices. Related: Russia Hits 100% Compliance With OPEC Cut

Private equity is also back in the oil game, spending US$19.8 billion on new ventures in the oil and gas industry – a threefold increase on an annual basis, according to data from Preqin. Again, the Permian has attracted a lot of this investment. Some analysts, quoted by Reuters, believe that the big reason for this renewed investment drive has more to do with production prices than with international benchmarks, but not everyone in the industry shares this belief.

PwC analysts belong in the first camp: in their report on M&A in U.S. oil and gas, they noted that breakeven prices in the Permian are dropping so steadily that right now drillers there are generating the same margins as they were before the oil price crash. At the same time, oilfield service providers are in hiring mode and are raising prices. The Houston Chronicle reports that a third of service providers are already charging more for the work they provide.

Then there are the IPOs – three in the first quarter, of which one is a company focused on the Permian, Jagged Peak Energy, and two are oilfield service providers, Keane Group Inc., and ProPetro Holding, the latter also based in the Permian.

All this looks very good for the industry, but there are signs that this rush of activity is set for a slowdown through the rest of the year. For starters, as PwC notes, sellers of assets are starting to have greater expectations from potential buyers as the overall industry environment improves.

More importantly, however, some oil industry insiders are worrying that the shale oil recovery in the U.S. is happening too fast – something that Continental Resources’ Harold Hamm warned about a couple months ago at CERAWeek. If the rate of production building continues, it may very well offset any attempts on the part of OPEC to slim down global supplies to prop up prices, something we saw in the first quarter.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play