Oil production in the Permian Basin keeps growing as other U.S. shale plays falter.
The region spanning West Texas and New Mexico will produce more than 2 million barrels of oil a day next month for the first time in data going back to 2007, the Energy Information Administration said Monday. It’s the only area where output is forecast to grow, as production across the nation’s major oilfields is expected to drop 0.7 percent in November to 4.43 million barrels a day.
The Permian Basin, the largest oil region in the U.S., has been the most profitable shale play during the drilling recovery because of its cheaper operating costs and abundant resource base. Explorers are paying higher prices for drilling rights in Permian fields. RSP Permian Inc. paid the equivalent of $45,000 per acre in the Delaware Basin, the highest level ever seen in that section of the Permian, when it agreed last week to buy Silver Hill Energy Partners, according to Canaccord Genuity Inc.
Oil output in the Permian will increase 30,000 barrels a day to 2.01 million, while the Eagle Ford Shale in South Texas is expected to drop 35,000 barrels per day and the Bakken in North Dakota and Montana is forecast to drop 21,000 barrels per day.
Overall U.S. oil production may be continuing a downward trajectory, but “declines are slowing,” wrote Scott Hanold, an analyst at RBC Capital Markets, in a report Monday. He said oil output will begin gradually ramping back up in 2017 through 2018.
Even as current production slips, drilling rigs are going back to work at a rate that’s expected to grow, or at least remain stable, in November. As rigs become more efficient, they’re drilling more wells in less time, which will bring production online faster.
“Productivity per rig is something that should continue to grow across all major basins. It’s a trend,” said Matt Marietta, an analyst at Stephens Inc. in Houston, Texas, by phone. “It’ll be easy to have growth on a per-rig basis.”