WorldWide Drilling Resource

17 WorldWide Drilling Resource ® OCTOBER 2014 Directional Drilling on the Rise in Permian Basin Adapted from Information by the U.S. Energy Information Administration The Permian Basin, located in West Texas and southeastern New Mexico, has seen a significant increase in hori- zontal, oil-directed drilling activity over the past five months. This trend began in 2013, and has accelerated consistently since then. From the week ending on December 27, 2013, to the week ending May 9, 2014, the number of horizontal, oil-directed rigs in the Permian Basin rose by 63 rigs, 50% of the total increase in the United States. The increase in the number of rigs does not necessarily mean oil and gas production in the area will also increase. However, it does indicate producers are drawn to the potential for new production from the basin’s tight oil formations, which are stacked in layers. During the first quarter of 2014, near- ly 80% of all new horizontal, oil-directed drilling in the Permian Basin took place in just five counties - in Texas, Reeves (14 rig increase); Ward (9 rig increase); Martin (8 rig increase); Midland (8 rigs increase); and Eddy County, New Mexico (6 rig increase). There are several reasons the changes to a formation's rig count are not a perfect indicator of its future pro- duction, including: j Changes in rig efficiency, which can include longer horizontal lengths, greater proppant injection, as well as reduced drilling and completion time. j The decline rate of production from legacy wells, which is particu- larly relevant in the Permian Basin, where development began in the early 1940s. j The fact that in recent years, oil production has increasingly come from wells which also produce nat- ural gas, and vice-versa. The dramatic change in the hori- zontal, oil-directed rig count seen in the Permian indicates a significant rise in activity relative to recent developments in other major production areas. At the beginning of 2013, both the Eagle Ford Shale in South Texas, and the Williston Basin in North Dakota and Montana (including the Bakken Shale), exceeded the Permian Basin in the num- ber of drilling rigs. By the end of 2013, the Permian Basin's 215 rigs surpassed both the Eagle Ford with 173, and the Williston Basin with 164 rigs. During the first quarter of 2014, the increase in oil- directed horizontal rigs in the Permian Basin was more than four times the com- bined increase in the Eagle Ford and Williston Basin. )' ) % ) ' # *# $ ' : &4)1*4 *18*4 : : &4)1*4 *18*4 : : &4)1*4 *18*4 : : &4)1*4 *18*4 % ( ) ' ) '%# : &4)1*4 *18*4 : : &4)1*4 *18*4 : : &4)1*4 *18*4 : &4)1*4 *18*4 : &4)1*4 *18*4 ' $ + *#&( $ )% ! &4)1*4 *18*4 : # #4-3/*: ! ! &4)1*4 *18*4 : # #4-3/*: ! ! &4)1*4 *18*4 : 24 : 73/*: ! ! &4)1*4 *18*4 : 73/*: ! ! &4)1*4 *18*4 : -4 4-8* 73/*: ! ! &4)1*4 *18*4 : 73/*: ! ! &4)1*4 *18*4 : 73/*: ! ! &4)1*4 *18*4 : 73/*: ! ! &4)1*4 *18*4 : 73/*: ! ! &4)1*4 *18*4 : # #4-3/*:>> ! ! &4)1*4 *18*4 : #4-3/*:>> > ! ! ;)4&7/-( 4276 703 ? ;)4&7/-( 4276 703 ? ;)4&7/-( 4276 703 ? '%*) *#& '#()'%$ $ % $ "% 6, "64**6 2(&,216&5 $" < 2745 &;5 & %**. = &: %&665 $" &1&)& 62 21)&; 4-)&; "** 274 %*' &+* 999 &4056421+0&(,-1* (20 0&-/ ))4*55 &0(- &4056421+0&(,-1* (20 * ") * *#&( : &52 73/*: ! ! : -/9*// 73/*: ! ! &4)1*4 *18*4 : #4-3/*: ! ! &4)1*4 *18*4 : 73/*: ! ! &4)1*4 *18*4 : 73/*: ! ! &52 : 73/*: ! !