Do our O&G experts have a take on this?

[VikingsGuy]

True “peak oil” (for the 50th time) or a natural artifact of Wall Street reluctance to fund and fed’s reluctance to permit new wells?

U.S. Shale Boom Shows Signs of Peaking as Big Oil Wells Disappear

America’s biggest oil gushers are shrinking, evidence that companies have drilled through much of their best wells and are poised to reach a plateau in productivity.

www.wsj.com

 

[Harrier]

I left that industry seven years ago so I doubt I still qualify as an expert, but I do know the real worry for U.S. oil companies, particularly those with downstream operations, isn’t so much peak production but peak U.S. demand for refined products. Demand peaked years ago and there is no sign it’s ever coming back.

 

[AvidIndoorsman]

True “peak oil” (for the 50th time) or a natural artifact of Wall Street reluctance to fund and fed’s reluctance to permit new wells?

U.S. Shale Boom Shows Signs of Peaking as Big Oil Wells Disappear

America’s biggest oil gushers are shrinking, evidence that companies have drilled through much of their best wells and are poised to reach a plateau in productivity.

www.wsj.com

I think “the Permian is maturing” is more accurate.

Basically when you drill HZ in Shale you form "Drilling Spacing Units" or DSUs the units pool together leased lands. The idea being that a well drains the oil for those lands so they are grouped together. The tracts then get a prorated share of the royalties based on the percent of the unitized lands they account for in the unit.

Leases have a term, 2-10 years, once a well is drilled they are "Held By Production" HBP until the well stops producing in paying quantities.

So an operator takes a lease position and then needs to unitize everything and drill one well in each unit to hold them.

These first parent wells, typically produce the most (can very if you improve your frack design or something), but they are more expensive to drill because there is no existing infrastructure pads, pipes, tanks and the rig having to move. You pay the rig company per day even if it's not drilling. So drilling multiple wells on one pad is cheaper.

So child wells are cheaper but produce less, but obviously you drill more of them.

The reason the Permian is so good is you can have pretty tight well spacing without losing productivity and there are multiple non communicating benches that produce oil. So multiple parent wells. (Lease will some times have depth severance (pugh) clauses meaning you have to drill a parent well in each formation to hold them.


Add to that oil fields look like a dart board with Tier 1, tier 2, and tier 3 areas which produce progressively less oil.

So yeah the parent wells in the Tier 1 Permian rock have mostly been drilled, but there is a ton of inventory left. How much inventory obviously depends on how much oil we produce. I've heard anywhere between 10-30 years of inventory, based on current drilling rates.

If you look at current deals in the 2nd tier basins, folks aren't getting paid much for their assets. That signals to me that companies aren't looking for more inventory right now. ~2016-2017 folks were paying hand over fist for inventory... a company in WY might have gone for 1B now that same company probably transacts for 300mm.

So peak oil... meh depends on demand. Global demand continues to climb so we shall see.