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Permian Basin 2017

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PERMIAN BASIN: PRODUCTION FORECAST 78 | November 2017 | hartenergy.com time lags many of these wells have probably been completed and are even seeing first sales; we have to wait for either com- pletion filings or first produc- tion reporting to know for sure. Drillinginfo generally sees a very constant roll off of DUCs as time progresses, as shown in Figure 12. But we have also seen a steady increase in the number of wells that are becoming real DUCs, not just regulatory lag DUCs. Economics in the Permian Basin are among the best in the country and justify the rapid rise in rig count in this area, as shown in Figure 15. The U.S. onshore rig count reached a low on May 4, 2016, with 433 active rigs at the time. As of the start of August 2017, the active rig count had climbed to 1,052. Of the 619 rigs that have been added to the active fleet, 264 were added to the Midland and Delaware basins. This equates to ~ 43% of the rig additions since the May 4, 2016, low. The Permian Basin is at the forefront of the U.S. and global supply curve due to the very low breakevens across the play and its multiple stacked formations. Tier 1 wells in the most prolific parts of the Permian Basin yield a 15% rate of return at WTI prices below $40/bbl. Much of the tier 2 wells return the same 15% at WTI prices below $52/bbl, which is the close to the recent high observed for WTI prices at the time of this writing. The favorable nature of the eco- nomics in the Permian Basin FIGURE 12. DUCs vs. Last Day onsite FIGURE 13. Permian DUCs vs. Last Day onsite

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