More oil production possible from Texas shale

A report from the Dallas Fed finds the Permian shale ready for more under the right conditions.
By Daniel J. Graeber  |  April 21, 2017 at 6:13 AM
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April 21 (UPI) -- Exploration and production activity in the Permian basin shows the area could respond with major output once conditions improve, the Dallas Fed said.

The Federal Reserve Bank of Dallas in a report on regional energy indicators said gains in crude oil prices since the Organization of Petroleum Exporting Countries in January placed a ceiling on production has improved market conditions in Texas.

"The firming of crude oil prices since the OPEC agreement has likely boosted confidence in the sector, which is reflected in the continuous increase in drilled wells in the Permian since the beginning of this year," Dallas Fed senior research analyst Kunal Patel said in a statement.

The overall picture for the United States has improved steadily since January, with total domestic crude oil production above 9 million barrels per day. Output in Texas from the Permian shale basin, one of the more resilient oil patches in a weaker market, improved by 57,700 bpd in March to 2.1 million bpd. The Eagle Ford shale is not excluded from the rally, showing a gain last month of 13,200 bpd to 1.15 million bpd.

Improved oil prices have led to more spending in exploration and production activity, a trend often reflected as rig counts. March rig activity in the Permian and Eagle Ford shale basins increased by 410 and about half of all the rigs in service in the United States are in Texas.

Another metric, drilled but uncompleted wells, is at a record level and could indicate future growth.

"The rising DUC count in the Permian may imply that the basin can potentially respond with a larger increase in production when market conditions are more favorable," Patel said.

The latest survey from the Dallas Fed found mostly upbeat business sentiment over the past three months on the back of the increase in permits issued for new oil and gas wells. Separately, Karr Ingham, an economist for the Texas Alliance of Energy Producers, said earlier this week that energy sector developments in the state are in an expansionary cycle.

"We still have a long way to go, but 2017 is going to be a year of recovery and expansion in the Texas statewide oil and gas exploration and production economy," he said in a statement.

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