July 5, 2019 – Forbes
Valuations In The Permian: Gearing Up For The Long Haul Or Running In Place?
By Bryce Erickson
When it comes to the oil patch, the word “growth” can be a vague term. It’s a word that can be masqueraded around to suit the perspective of whomever utters it. What does it mean in an industry whose principle resources are constantly in a state of decline? When it comes to the Permian Basin these days, growth applies to resources, drilling locations and production. Unfortunately, the same can’t be said for profits, free cash flow or new IPOs. Don’t misunderstand, the Permian is the king of U.S. oil plays and by some measures could be taking the crown as the biggest oil field in the world. However, various economic forces are keeping profits and valuations in check..…
Pipeline Capacity (Finally) Arriving
One of the biggest constraints for the Permian over the past 15 months has been a lack of pipeline capacity. For months on end, local prices in the Permian suffered huge differentials to NYMEX prices due to the bottleneck issues that plagued the area. Transportation came at a premium and so did costs; however, that's in the process of changing. According to the American Petroleum Institute, the Permian Basin is expected to get 1.5 million barrels a day of new crude capacity. This includes expansions of the Grey Oak, Cactus II and Seminole Red pipelines, taking crude to the Gulf of Mexico for refining or export. Natural gas, which has been flared in many cases, is also getting a reprieve. Almost 5.0 bcf per day of new gas capacity additions are expected to go live by the end of 2019. See the map below made by RBN Energy....
Read the full article here: https://www.forbes.com/sites/bryceerickson1/2019/07/05/valuations-in-the-permian-gearing-up-for-the-long-haul-or-running-in-place/#7752a0a9312a
