Midland TX (5/4/09) - Sunrise in the Permian Basin see pump jacks along with a new well being drilled in west Texas. Energy Minute In The Oil Patch

Booming Out of the Bust

Well, here we go again. It’s not hard to see why oil and natural gas prices are inherently volatile. They are among the most important, if not the most important, commodities in the world. As author Alex Epstein says, energy is the industry that powers every other industry – and oil and gas provide most of that energy. First-world nations need oil and gas to maintain their first-world status and keep up with the “Republic of Jones.” Third-world nations are still waiting for their opportunity to have access to cheap, abundant energy and graduate to join the first-world club. World prices ebb and flow on the daily whims of geopolitical events, on economic recessions and expansions, on increasing demand and on expanding supply. While the wealthy and comfortable wrangle over computer models on climate change, the impoverished and energy-deprived millions living in less comfortable circumstances long for a taste of the cheap energy the computer-modelers take for granted.

With a hefty dose of cautious optimism, it does look like we have emerged from the last bust ready to produce even more in volume, and with even more efficiency. However, as with most busts, this last one left its share of bodies behind. The Dallas-based law firm of Haynes & Boone tracked industry bankruptcies during the bust, and the total number of industry-related companies that had to seek bankruptcy protection reached 144; 66 of which were in Texas. Only six companies have had to seek bankruptcy protection so far in 2018, so it would seem that the bust has ended, and we are now looking at the next expansion. It remains to be seen whether it will be slow and steady — or something else.

Toward that end, companies are pursuing drilling programs and are, once again, investing in exploring for and developing their reserves. The Oil & Gas Journal reports that overall oil and gas industry capital spending in the U.S. will increase by 15 percent this year. Most company budgets are assuming $50-55 a barrel for oil (a level that actual prices continue to surpass) and $3.00/mcf in natural gas (a level that actual prices haven’t quite achieved yet).

There is always the ever-present worry that, once industry cranks up production again because prices have risen enough for it to make sense, the increased production will cause another price collapse because supply outstrips demand (the continuing cause for depressed natural gas prices). However, this time around, there are interesting aspects that might help prevent an abrupt drop in crude prices. OPEC continues to voluntarily restrict their production, having finally given up on running the U.S. shale production out of business. Domestic producers spent the bust improving efficiencies so that now they enjoy a much lower break-even price. Venezuela is on the verge of turning off their crude supply altogether. Iran might have their crude supply sanctioned back into timeout. On the natural gas front, U.S. LNG export terminals are coming on-line, and countries like China are becoming big customers. Overall, global demand continues to increase.

The economic picture looks promising. In 2008, the U.S. had a daily production of five million barrels per day (bpd) of oil and 63 billion cubic feet (bcf) of natural gas. In 2018, we are expected to produce 10 million bpd of oil and 80 bcf/d natural gas. That is astounding. Every semester, I tell a new crop of unaware law students that, not only are we not running out of oil and natural gas, we have more now than we have ever thought we had over the 159 years we have been commercially producing crude oil.

One of the principal reasons the picture looks so rosy for the U.S. is a little area known as the Permian Basin. It has been continuously and prolifically producing oil since 1923; and, even after having produced for almost 100 years, it is predicted to become the world’s largest producing area in the next few years. This month, it is estimated it will produce 3.18 million bpd. If the Permian Basin were its own country in OPEC, it would rank number four in total production; and it will likely pass Iran by the end of this year and so would become number three.

Compared to just two years ago in May 2016, when there were only 133 active drilling rigs in the Permian Basin, there were 463 active drilling rigs (and growing) there in May 2018. However, the Permian Basin is not the only area enjoying renewed activity. As reported by Baker Hughes in The Wall Street Journal, using the same dates for comparison, the Williston Basin rig count has gone from 24 in May 2016 to 57 in May 2018; in the DJ Niobrara, from 12 to 24; in the Granite Wash, from 3 to 13; in the Cana Woodford, from 27 to 70; and, in the Eagle Ford, from 27 to 66.

Running the Energy Law program at Texas Tech School of Law, where the Permian Basin is our backyard, compels me to say just another word or two about this incredibly vast treasure chest of hydrocarbons. The three primary producing regions of the Permian Basin are the Delaware Basin, the Central Basin Platform and the Midland Basin. That part of the Permian Basin is 300 miles long and 400 miles wide — about the size of the state of South Dakota. The Permian Basin also has a dozen productive intervals — a veritable layer cake of hydrocarbon-producing formations. Another way to describe the vastness of the Permian Basin is to realize that the entire basin covers 102,000 square miles and produced 815 million barrels of oil in 2017.

It would not be surprising, and might even turn out to be correct, to predict that the current measured euphoria will, like every time before, eventually crash and burn into the next bust. However, during the most recent bust, I was struck that companies not only didn’t pack up and leave Midland but they doubled down and invested even more heavily in their presence in Midland and the Permian Basin. Those decisions, if wrong, could prove to be doubly, if not more, expensive. The fact that so many companies chose to spend more money on the Permian Basin during the bust is testament to the future of the Permian Basin.

The strange-but-true coincidence of the Permian Basin is that it is, not only the king of oil-producing basins in the world, but it has also become the wind capital of the world and is quickly becoming a major area for generating solar energy. It is a true energy triple threat.

About the author: Bill Keffer is a contributing columnist to SHALE Oil & Gas Business Magazine. He teaches at the Texas Tech University School of Law and continues to consult. He also served in the Texas Legislature from 2003 to 2007.

J. G. Domke/bigstock.com

Read an unlimited number of articles by signing up for a free account:
Terms and Conditions

Agreement between User and www.shalemag.com
Welcome to www.shalemag.com. The www.shalemag.com website (the “Site”) is comprised of various web pages operated by SHALE Oil & Gas Business Magazine (“SHALE Magazine”). www.shalemag.com is offered to you conditioned on your acceptance without modification of the terms, conditions, and notices contained herein (the “Terms”). Your use of www.shalemag.com constitutes your agreement to all such Terms. Please read these terms carefully, and keep a copy of them for your reference.

www.shalemag.com is a News and Information Site.

Shale Oil & Gas Business Magazine is a publication that showcases the dynamic impact of the energy industry. The mission of SHALE is to promote economic growth and business opportunities and to further the general understanding of how the energy industry contributes to the economic well-being of Texas and the United States as a whole. Shale’s distribution includes industry leaders and businesses, service workers, entrepreneurs and the public at large.

Privacy
Your use of www.shalemag.com is subject to SHALE Magazine’s Privacy Policy. Please review our Privacy Policy, which also governs the Site and informs users of our data collection practices.

Electronic Communications
Visiting www.shalemag.com or sending emails to SHALE Magazine constitutes electronic communications. You consent to receive electronic communications and you agree that all agreements, notices, disclosures and other communications that we provide to you electronically, via email and on the Site, satisfy any legal requirement that such communications be in writing.

Your Account
If you use this site, you are responsible for maintaining the confidentiality of your account and password and for restricting access to your computer, and you agree to accept responsibility for all activities that occur under your account or password. You may not assign or otherwise transfer your account to any other person or entity. You acknowledge that SHALE Magazine is not responsible for third party access to your account that results from theft or misappropriation of your account. SHALE Magazine and its associates reserve the right to refuse or cancel service, terminate accounts, or remove or edit content in our sole discretion.

Children Under Thirteen
SHALE Magazine does not knowingly collect, either online or offline, personal information from persons under the age of thirteen. If you are under 18, you may use www.shalemag.com only with permission of a parent or guardian.

Cancellation/Refund Policy
You may cancel your subscription at any time. Any cancellations made after 14 days of service will not qualify for a refund. Please contact us at kym@shalemag.com with any questions.

Links to Third Party Sites/Third Party Services
www.shalemag.com may contain links to other websites (“Linked Sites”). The Linked Sites are not under the control of SHALE Magazine and SHALE Magazine is not responsible for the contents of any Linked Site, including without limitation any link contained in a Linked Site, or any changes or updates to a Linked Site. SHALE Magazine is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement by SHALE Magazine of the site or any association with its operators.

Certain services made available via www.shalemag.com are delivered by third party sites and organizations. By using any product, service or functionality originating from the www.shalemag.com domain, you hereby acknowledge and consent that SHALE Magazine may share such information and data with any third party with whom SHALE Magazine has a contractual relationship to provide the requested product, service or functionality on behalf of www.shalemag.com users and customers.

No Unlawful or Prohibited Use/Intellectual Property
You are granted a non-exclusive, non-transferable, revocable license to access and use www.shalemag.com strictly in accordance with these terms of use. As a condition of your use of the Site, you warrant to SHALE Magazine that you will not use the Site for any purpose that is unlawful or prohibited by these Terms. You may not use the Site in any manner which could damage, disable, overburden, or impair the Site or interfere with any other party’s use and enjoyment of the Site. You may not obtain or attempt to obtain any materials or information through any means not intentionally made available or provided for through the Site.

All content included as part of the Service, such as text, graphics, logos, images, as well as the compilation thereof, and any software used on the Site, is the property of SHALE Magazine or its suppliers and protected by copyright and other laws that protect intellectual property and proprietary rights. You agree to observe and abide by all copyright and other proprietary notices, legends or other restrictions contained in any such content and will not make any changes thereto.

You will not modify, publish, transmit, reverse engineer, participate in the transfer or sale, create derivative works, or in any way exploit any of the content, in whole or in part, found on the Site. SHALE Magazine content is not for resale. Your use of the Site does not entitle you to make any unauthorized use of any protected content, and in particular you will not delete or alter any proprietary rights or attribution notices in any content. You will use protected content solely for your personal use, and will make no other use of the content without the express written permission of SHALE Magazine and the copyright owner. You agree that you do not acquire any ownership rights in any protected content. We do not grant you any licenses, express or implied, to the intellectual property of SHALE Magazine or our licensors except as expressly authorized by these Terms.

Use of Communication Services
The Site may contain bulletin board services, chat areas, news groups, forums, communities, personal web pages, calendars, and/or other message or communication facilities designed to enable you to communicate with the public at large or with a group (collectively, “Communication Services”). You agree to use the Communication Services only to post, send and receive messages and material that are proper and related to the particular Communication Service.

By way of example, and not as a limitation, you agree that when using a Communication Service, you will not: defame, abuse, harass, stalk, threaten or otherwise violate the legal rights (such as rights of privacy and publicity) of others; publish, post, upload, distribute or disseminate any inappropriate, profane, defamatory, infringing, obscene, indecent or unlawful topic, name, material or information; upload files that contain software or other material protected by intellectual property laws (or by rights of privacy of publicity) unless you own or control the rights thereto or have received all necessary consents; upload files that contain viruses, corrupted files, or any other similar software or programs that may damage the operation of another’s computer; advertise or offer to sell or buy any goods or services for any business purpose, unless such Communication Service specifically allows such messages; conduct or forward surveys, contests, pyramid schemes or chain letters; download any file posted by another user of a Communication Service that you know, or reasonably should know, cannot be legally distributed in such manner; falsify or delete any author attributions, legal or other proper notices or proprietary designations or labels of the origin or source of software or other material contained in a file that is uploaded; restrict or inhibit any other user from using and enjoying the Communication Services; violate any code of conduct or other guidelines which may be applicable for any particular Communication Service; harvest or otherwise collect information about others, including e-mail addresses, without their consent; violate any applicable laws or regulations.

SHALE Magazine has no obligation to monitor the Communication Services. However, SHALE Magazine reserves the right to review materials posted to a Communication Service and to remove any materials in its sole discretion. SHALE Magazine reserves the right to terminate your access to any or all of the Communication Services at any time without notice for any reason whatsoever.

SHALE Magazine reserves the right at all times to disclose any information as necessary to satisfy any applicable law, regulation, legal process or governmental request, or to edit, refuse to post or to remove any information or materials, in whole or in part, in SHALE Magazine’s sole discretion.

Always use caution when giving out any personally identifying information about yourself or your children in any Communication Service. SHALE Magazine does not control or endorse the content, messages or information found in any Communication Service and, therefore, SHALE Magazine specifically disclaims any liability with regard to the Communication Services and any actions resulting from your participation in any Communication Service. Managers and hosts are not authorized SHALE Magazine spokespersons, and their views do not necessarily reflect those of SHALE Magazine.

Materials uploaded to a Communication Service may be subject to posted limitations on usage, reproduction and/or dissemination. You are responsible for adhering to such limitations if you upload the materials.

Materials Provided to www.shalemag.com or Posted on Any SHALE Magazine Web Page
SHALE Magazine does not claim ownership of the materials you provide to www.shalemag.com (including feedback and suggestions) or post, upload, input or submit to any SHALE Magazine Site or our associated services (collectively “Submissions”). However, by posting, uploading, inputting, providing or submitting your Submission you are granting SHALE Magazine, our affiliated companies and necessary sublicensees permission to use your Submission in connection with the operation of their Internet businesses including, without limitation, the rights to: copy, distribute, transmit, publicly display, publicly perform, reproduce, edit, translate and reformat your Submission; and to publish your name in connection with your Submission.

No compensation will be paid with respect to the use of your Submission, as provided herein. SHALE Magazine is under no obligation to post or use any Submission you may provide and may remove any Submission at any time in SHALE Magazine’s sole discretion.

By posting, uploading, inputting, providing or submitting your Submission you warrant and represent that you own or otherwise control all of the rights to your Submission as described in this section including, without limitation, all the rights necessary for you to provide, post, upload, input or submit the Submissions.

Third Party Accounts
You will be able to connect your SHALE Magazine account to third party accounts. By connecting your SHALE Magazine account to your third party account, you acknowledge and agree that you are consenting to the continuous release of information about you to others (in accordance with your privacy settings on those third party sites). If you do not want information about you to be shared in this manner, do not use this feature.

International Users
The Service is controlled, operated and administered by SHALE Magazine from our offices within the USA. If you access the Service from a location outside the USA, you are responsible for compliance with all local laws. You agree that you will not use the SHALE Magazine Content accessed through www.shalemag.com in any country or in any manner prohibited by any applicable laws, restrictions or regulations.

Indemnification
You agree to indemnify, defend and hold harmless SHALE Magazine, its officers, directors, employees, agents and third parties, for any losses, costs, liabilities and expenses (including reasonable attorney’s fees) relating to or arising out of your use of or inability to use the Site or services, any user postings made by you, your violation of any terms of this Agreement or your violation of any rights of a third party, or your violation of any applicable laws, rules or regulations. SHALE Magazine reserves the right, at its own cost, to assume the exclusive defense and control of any matter otherwise subject to indemnification by you, in which event you will fully cooperate with SHALE Magazine in asserting any available defenses.

Arbitration
In the event the parties are not able to resolve any dispute between them arising out of or concerning these Terms and Conditions, or any provisions hereof, whether in contract, tort, or otherwise at law or in equity for damages or any other relief, then such dispute shall be resolved only by final and binding arbitration pursuant to the Federal Arbitration Act, conducted by a single neutral arbitrator and administered by the American Arbitration Association, or a similar arbitration service selected by the parties, in a location mutually agreed upon by the parties. The arbitrator’s award shall be final, and judgment may be entered upon it in any court having jurisdiction. In the event that any legal or equitable action, proceeding or arbitration arises out of or concerns these Terms and Conditions, the prevailing party shall be entitled to recover its costs and reasonable attorney’s fees. The parties agree to arbitrate all disputes and claims in regards to these Terms and Conditions or any disputes arising as a result of these Terms and Conditions, whether directly or indirectly, including Tort claims that are a result of these Terms and Conditions. The parties agree that the Federal Arbitration Act governs the interpretation and enforcement of this provision. The entire dispute, including the scope and enforceability of this arbitration provision shall be determined by the Arbitrator. This arbitration provision shall survive the termination of these Terms and Conditions.

Class Action Waiver
Any arbitration under these Terms and Conditions will take place on an individual basis; class arbitrations and class/representative/collective actions are not permitted. THE PARTIES AGREE THAT A PARTY MAY BRING CLAIMS AGAINST THE OTHER ONLY IN EACH’S INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PUTATIVE CLASS, COLLECTIVE AND/ OR REPRESENTATIVE PROCEEDING, SUCH AS IN THE FORM OF A PRIVATE ATTORNEY GENERAL ACTION AGAINST THE OTHER. Further, unless both you and SHALE Magazine agree otherwise, the arbitrator may not consolidate more than one person’s claims, and may not otherwise preside over any form of a representative or class proceeding.

Liability Disclaimer
THE INFORMATION, SOFTWARE, PRODUCTS, AND SERVICES INCLUDED IN OR AVAILABLE THROUGH THE SITE MAY INCLUDE INACCURACIES OR TYPOGRAPHICAL ERRORS. CHANGES ARE PERIODICALLY ADDED TO THE INFORMATION HEREIN. SHALE OIL & GAS BUSINESS MAGAZINE AND/OR ITS SUPPLIERS MAY MAKE IMPROVEMENTS AND/OR CHANGES IN THE SITE AT ANY TIME.

SHALE OIL & GAS BUSINESS MAGAZINE AND/OR ITS SUPPLIERS MAKE NO REPRESENTATIONS ABOUT THE SUITABILITY, RELIABILITY, AVAILABILITY, TIMELINESS, AND ACCURACY OF THE INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS CONTAINED ON THE SITE FOR ANY PURPOSE. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ALL SUCH INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS ARE PROVIDED “AS IS” WITHOUT WARRANTY OR CONDITION OF ANY KIND. SHALE OIL & GAS BUSINESS MAGAZINE AND/OR ITS SUPPLIERS HEREBY DISCLAIM ALL WARRANTIES AND CONDITIONS WITH REGARD TO THIS INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS, INCLUDING ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT.

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL SHALE OIL & GAS BUSINESS MAGAZINE AND/OR ITS SUPPLIERS BE LIABLE FOR ANY DIRECT, INDIRECT, PUNITIVE, INCIDENTAL, SPECIAL, CONSEQUENTIAL DAMAGES OR ANY DAMAGES WHATSOEVER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF USE, DATA OR PROFITS, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE USE OR PERFORMANCE OF THE SITE, WITH THE DELAY OR INABILITY TO USE THE SITE OR RELATED SERVICES, THE PROVISION OF OR FAILURE TO PROVIDE SERVICES, OR FOR ANY INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS OBTAINED THROUGH THE SITE, OR OTHERWISE ARISING OUT OF THE USE OF THE SITE, WHETHER BASED ON CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, EVEN IF SHALE OIL & GAS BUSINESS MAGAZINE OR ANY OF ITS SUPPLIERS HAS BEEN ADVISED OF THE POSSIBILITY OF DAMAGES. BECAUSE SOME STATES/JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, THE ABOVE LIMITATION MAY NOT APPLY TO YOU. IF YOU ARE DISSATISFIED WITH ANY PORTION OF THE SITE, OR WITH ANY OF THESE TERMS OF USE, YOUR SOLE AND EXCLUSIVE REMEDY IS TO DISCONTINUE USING THE SITE.

Termination/Access Restriction
SHALE Magazine reserves the right, in its sole discretion, to terminate your access to the Site and the related services or any portion thereof at any time, without notice. To the maximum extent permitted by law, this agreement is governed by the laws of the State of Texas and you hereby consent to the exclusive jurisdiction and venue of courts in Texas in all disputes arising out of or relating to the use of the Site. Use of the Site is unauthorized in any jurisdiction that does not give effect to all provisions of these Terms, including, without limitation, this section.

You agree that no joint venture, partnership, employment, or agency relationship exists between you and SHALE Magazine as a result of this agreement or use of the Site. SHALE Magazine’s performance of this agreement is subject to existing laws and legal process, and nothing contained in this agreement is in derogation of SHALE Magazine’s right to comply with governmental, court and law enforcement requests or requirements relating to your use of the Site or information provided to or gathered by SHALE Magazine with respect to such use. If any part of this agreement is determined to be invalid or unenforceable pursuant to applicable law including, but not limited to, the warranty disclaimers and liability limitations set forth above, then the invalid or unenforceable provision will be deemed superseded by a valid, enforceable provision that most closely matches the intent of the original provision and the remainder of the agreement shall continue in effect.

Unless otherwise specified herein, this agreement constitutes the entire agreement between the user and SHALE Magazine with respect to the Site and it supersedes all prior or contemporaneous communications and proposals, whether electronic, oral or written, between the user and SHALE Magazine with respect to the Site. A printed version of this agreement and of any notice given in electronic form shall be admissible in judicial or administrative proceedings based upon or relating to this agreement to the same extent and subject to the same conditions as other business documents and records originally generated and maintained in printed form. It is the express wish to the parties that this agreement and all related documents be written in English.

Changes to Terms
SHALE Magazine reserves the right, in its sole discretion, to change the Terms under which www.shalemag.com is offered. The most current version of the Terms will supersede all previous versions. SHALE Magazine encourages you to periodically review the Terms to stay informed of our updates.

Contact Us
SHALE Magazine welcomes your questions or comments regarding the Terms:

SHALE Oil & Gas Business Magazine

5150 Broadway #493

San Antonio, TX 78209

Email Address:
kym@shalemag.com

Telephone number:
(210) 240-7188

Effective as of November 27, 2017
I agree with the Terms & Conditions

Leave a Reply

Your email address will not be published. Required fields are marked *

Share via