Oil productivity for the average Permian well receded in 2022 on a year-on-year basis, triggering questions once again on the extent of high-quality drill site inventory remaining in the largest oil producing basin in the US.
The decline was more pronounced in the Permian’s Delaware Basin, which is the western part of the Permian oil play and stretches across western Texas and southeastern New Mexico. Well productivity also slid in the Midland Basin, which lies in the eastern part of the Permian.
An oft-cited measure of an oil (and gas) well’s productivity is the six-month production, which is the amount of oil and gas a well produces in the first six-months of its operation. Petroleum engineers would also adjust this by the length of the well’s lateral leg, or the horizontal section of the well bore. Wells with longer laterals produce more oil and gas but cost more to drill.
Using a well’s first six-months production as a measure of productivity and adjusting for lateral lengths, BloombergNEF found that the average Delaware Basin well’s oil output declined by 11% in 2022 compared to 2021. In the Texas side of the Delaware Basin, productivity dived by 13% year-on-year. In the New Mexico side, productivity tumbled by 8%. Oil productivity for the average Delaware Basin well in New Mexico’s state-side has been slipping since at least 2019. This trend accelerated in 2022.
Meanwhile, Midland Basin wells are faring better. Oil output slipped by a relatively modest 5% in 2022 year-on-year after surging in 2021.
Back in 2019, Schlumberger, one of the largest US oilfield services companies, estimated that 50% of wells drilled in the Permian play were in-fill wells – or wells drilled in close proximity with an existing well. Productivity of an in-fill wells is usually lower compared to non in-fill wells.
Bloomberg
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