Horizontal Permitting Activity has increased post-invasion, but still lags behind pre-COVID levels

How much production of oil and gas is left in the major basins? As you can imagine, operators, state agencies, financial services, and many other stakeholders are interested in this key question.

We all know that the Hubbert’s peak oil theory underestimated the impact of resource and technology growth.

One approach we have often heard to answer this question is examining well performance trends. If wells start becoming less productive, perhaps that is an indication that operators are running out of quality inventory, and production declines will logically follow.

Major basins peak oil production

We took a quick look at this in the major basins, and the story is definitely not so simple. In the oil plays, we have seen peaks in the Eagle Ford, Bakken, and DJ basins, with the Permian still making all time high oil rates:

Since February, permits have gone up to an average of 1307 per month, a 23% increase over pre-invasion levels. But this is still below the pre-COVID average of 1374 permits per month.

In the Permian (yellow in the above chart), permit levels are roughly back to where they were before COVID, even though in March of this year they set a new record of 840 drilling permits for new horizontal wells. But the Eagle Ford and the Bakken lag behind, as operators confront a lack of inventory, a trend that began before the downturn. Of the major plays, only the Haynesville is exceeding pre-COVID permitting levels.

What does this mean for the production outlook?

The period between permit approval and the start of drilling can vary significantly amongst operators within the same basin, and many permits are never drilled. But in aggregate, permitting levels do provide meaningful data about how much activity operators are planning.

With longer and longer laterals, each permit can produce more hydrocarbon. But this doesn’t seem like the explosion of activity you would need to make a meaningful increase in L48 production.

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