Permian Basin 2018

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PERMIAN BASIN: PRODUCTION FORECAST 76 | October 2018 | Sticking with what works In 2019, leading operators will continue to push on levers that served them well in recent years. Efforts will focus on maintaining firm control on completed well costs, leveraging infrastruc- ture to control both procurement and field operating costs, and bolstering capabilities to increase probabilities for success in turning on lesser resources more economically. To accom- plish this, operators have begun outlining plans to increasingly focus on development mode activities. One key benefit of operating in devel- opment mode is increasing the number of wells and zones per pad. However, we expect only modest gains from increases in wells per pad. When it comes to drill- ing, the low-hanging fruit was harvested years ago. Skidding and walking rigs took over the landscape and changed the drilling operations forever. Mobi- lization times cratered, nonproductive drill times were reduced, and automation slashed costs while enhancing performance and safety. Today, pilots testing remote drilling using remote sensors are breaking new ground. If successful, the funda- mental relationship between equipment and crew will surely change. In the present, not much is left to pick from the rig tree—maybe some bi-fuel savings, but not much else. In recent years, more time and attention have been devoted to planning of wells and drilling. Greater emphasis on drilling high-quality wells seems to be the norm. Operators value the bene- fits of working on a high-quality well, wells with fewer extreme doglegs. Hence, drillers are moti- vated to drill both fast and straight. With drill- ing operations appearing in good order and with estimates attributing about 35% of total capex to drilling, the operators began shifting their atten- tion to completions. Completions and related activities Shining the light on procurement, much has happened to drive down costs in recent years. Expect to see limited improvements from here. Sand is increasingly sourced nearby, ensuring operators the lowest cost on the single largest cost in a well. With the transition to local sand now well underway, most operators have established multiple direct channel sources and have begun reducing long-haul sources in FIGURE 4. Permian Basin Categories

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