Why Permian is So Attractive for Investors?

Excellent production, High EUR/Well, lower costs, lowest BEP and Highest IRR

he Permian Basin is a sedimentary basin largely contained in the western part of the state of Texas and the southeastern part of the U.S. state of New Mexico. It is so named because it has one of the world's thickest deposits of rocks from the Permian geologic period. The greater Permian Basin comprises several component basins; of these, Midland Basin is the largest, Delaware basin is the second largest, and  Marla Basin is the smallest.

The geology of the Permian Basin is complex, with numerous oil-producing plays in stacked layers. The Permian has commercial accumulations of oil and gas at depths ranging from 1,000 feet to more than 25,000 feet.

By the time the shale oil revolution started, the Permian had already produced billions of barrels of oil. The area has been pumping crude since 1921, and made boomtowns out of cities like Midland and Odessa long before fracking became a household word. According to the Texas Railroad Commission, the Permian Basin has already produced more than 29 billion barrels of oil and 75 trillion cubic feet of natural gas. To put these numbers in perspective, US consumed 6.8 billion barrels of oil and 25 trillion cubic feet of natural gas in 2012.

Permian has long history of production, but in 2017 the production surpassed all previous record and produced roughly 2.75 million barrels per day. It consists of five sands, but the Wolfcamp is the one with the lowest Break Even Price (BEP), lower well cost, better EUR/Well and highest IRR (Table below).  The gas and liquid type curves are also depicted below. During the recent down turn, Wolfcamp sands is among few plays that had BEP low enough to maintain drilling and production.