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Permian Basin 2018

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PERMIAN BASIN: PRODUCTION FORECAST 72 | October 2018 | hartenergy.com images are comprised of multiple plays. In this case, the Delaware sub-basin heated (red) area is comprised of both Bone Spring and Wolfcamp Delaware wells. To the east in the Midland sub-basin, the Wolfcamp Midland (which includes horizontal Spraberry) provides a clear image of where the good wells are located. Not evident from the image is the fact that many Benchwarmers are also found interbedded with these star performers. Consequently, deeper analysis of the Midland sub-basin is needed to gain a better perspective on opportunities and risks. Looking at just the Bone Spring wells, there is an arc of high-quality wells located almost exclu- sively in New Mexico. While the map paints a positive image in general, the lack of consistency throughout is a drawback to the Bone Spring and key to our assessment on the limited areal extent of the play. Filtering down for the Wolfcamp Delaware, a large core area emerges in Ward, Winkler, Reeves and Loving counties. This large areal extent of consistent and highly prospective locations is key to the high values found in the play. The play continues to capture a modicum of attention and capital. Importantly, a num- ber of companies made recent announcements of expanding success in the second and third Bone Spring. This is to be expected as the Bone Spring has a smaller, but still impressive inven- tory of high-quality locations. Stratas estimates - 5,000 10,000 15,000 20,000 25,000 Daily Production (MMcf) Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Permian Other Bone Spring Wolfcamp Midland Wolfcamp Delaware FIGURE 2. Permian Shale and Tight Gas Production Estimate - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Daily Production (Thousand bbl) Permian Other Bone Spring Wolfcamp Midland Wolfcamp Delaware FIGURE 1. Permian Liquids Production Estimate (All data and images courtesy of Stratas Advisors)

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