Loving County, Texas is where you want to be

In a Bloomberg Intelligence briefing today, Bloomberg’s analysts outlined the current economics of Permian wells, examining how the country’s most popular basin will handle changing oil prices.

The top counties in the Permian were examined individually, with the focus on Glasscock, Howard, Loving, Martin, Midland and Reeves Counties in Texas and Eddy and Lea Counties in New Mexico.

Permian Basin Breakeven Oil Prices Span $45 to $82 per Barrel

Loving County has lowest average breakeven

This analysis showed that the lowest breakevens in major Permian counties are found in Loving County, the heart of Permian activity. The average Loving County well requires $45.19/bbl oil to break even, assuming an average well cost of $7 million.

This relatively low breakeven price has translated to activity in Loving County, which has the third-most active rigs of any county in Texas, and the highest density of rigs.

There is an average of one rig every 21.2 square miles in Loving County, narrowly beating out Midland County, where there is one rig every 21.5 square miles.

Breakevens in the second major Permian county are only slightly higher, as the average Reeves County operation requires $45.38/bbl oil, according to Bloomberg analysts.

Operations in the New Mexico portion of the Permian are significantly less economic, however. According to Bloomberg, the average Lea county well requires $56.52/bbl to break even, while $81.77/bbl is required in Eddy County.

Midland basin operations are not quite as economic as the best Delaware locations, but most are nonetheless still economic. Martin, Howard and Midland each have breakevens below $50/bbl.

Permian Basin Breakeven Oil Prices Span $45 to $82 per Barrel

1,000 BOPD IPs make any county economic

Unsurprisingly, looking at the best wells brings breakevens down significantly. When top performing wells are considered, defined as wells with 30-day IPs of 1,000 BOPD or more, all counties at least break even at current prices.

Permian Basin Breakeven Oil Prices Span $45 to $82 per Barrel

Midland basin has higher proportion of top performing wells

The real question in this case is, how may wells are “top performers?”

In 2016, Lea County had the largest number and proportion of top performing wells, with 73 top performers out of a total of 241. However, even top performers in Lea County are only barely economic at current prices.

Overall, there is a higher proportion of high producing wells in the Midland basin, where just over 25% of 2016 wells had 30-day IPs higher than 1,000 BOPD. In the Delaware basin, just under 21% of wells are top performers.

Permian Basin Breakeven Oil Prices Span $45 to $82 per Barrel

Permian Basin Breakeven Oil Prices Span $45 to $82 per Barrel

Permitting activity focuses on best counties

Producers have noticed the economics of different counties, and this has been reflected in permitting activity. According to the Texas Railroad Commission, a total of 6,995 drilling permits have been issued in the Permian so far this year.

Reeves County is the most popular location, with 1,092 permits approved. Midland County is also a major location, with 809 permits issued. Permitting activity in Loving County mirrors drilling activity. The small county does not have the largest number of permits issued, the density of permitting activity exceeds any other county in Texas.

Permian Basin Breakeven Oil Prices Span $45 to $82 per Barrel

Source: EnerCom Analytics

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