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Permian Basin 2018

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PERMIAN BASIN: PRODUCTION FORECAST 70 | October 2018 | hartenergy.com F or several years now, the Permian Basin has dominated the oil and gas spotlight with promises of a larger-than-life hydrocarbon bo- nanza based on a seemingly never-ending stack of pay zones. References to as many as 50 hydrocar- bon zones and in-place resources of tens of billions of barrels lit up presentation materials and water- cooler chatter alike. As resource estimates went skyward, capital inflows followed suit. It wasn't long before Perm- ian activity surged and production growth bub- bled higher and higher in spite of challenges in various market sectors. Critics, some of whom hailed from the oil and gas community itself, raised doubts about the basin's ability to deliver. But shalers, especially those in the Permian, forged ahead with sheer determination. With the bene- fit of hindsight, Stratas can take stock of today's Permian opportunity. The phrase "this is different" seldom rings true. However, this is indeed true when speak- ing of the Permian. For starters, the Permian is truly immense in terms of areal extent. Add to that promising developments in producing from stacked, multilaterals. Finally, tack on transi- tioned business models, and there are year-on- year production increases in the basin of about 1 MMbbl/d for December 2018. Looking at the Permian Liquids Production Estimate chart (Figure 1), no doubts remain regarding the Wolfcamp Delaware's role as a key driver of growth in the Permian. At year-end, Wolfcamp Delaware production will be almost double compared to last year's figure. Key driv- ers behind the rapid growth are much higher rig counts and enhanced completion designs. Stratas is modeling a 31% year-on-year average increase in Wolfcamp Delaware drilling rigs for 2018. As for completions, watch lateral lengths, proppant loadings and proppant volumes. Permian Basin represents almost half of spuds. The Permian continues its march of market dominance. The basin is now home to almost half of U.S. spuds. Using StratasScope, Stratas Advisors' data and data-visualization toolkit, we reviewed the number and aging of DUCs (drilled but uncompleted wells). By our estimates, the Permian is sitting with a little more than 1,000 active DUCs. Obviously, most of these will be worked off in the normal course of operations. Some, however, will become "fallen angels." Fallen angels are wells that held DUC status more than two years ago and are now considered abandoned. In our recent tally of fallen angels, we counted roughly 300 wells. Permian = quality wells Great wells are easy to spot in the Permian. The following series of charts capture producing wells in the Permian according to productive categories. Colors range from red to blue, generating a heat map, where red indicates star performing wells, or MVPs (most valuable performers), or wells with peak production rates of 800-plus boe/d. On the other end of the spectrum are the Benchwarmers in cold blue, those wells with peak rates of less than 100 boe/d. In the Delaware Basin, a pronounced sweet spot is well defined and big. When looking at these maps, it is important to remember that the Operators continue moves to cut operating costs and increase efficiencies. The Permian Shuffle By Stephen G. Beck Senior Director, Upstream, Stratas Advisors

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