Entering text into the input field will update the search result below

Permian Basin To Take Market Share In Short-Cycle World

Jul. 06, 2017 2:41 PM ETAPA, CHK, CLB, CXO, DD, DVN, EOG, ET, KMI, MTDR, NS, OXY, PAA, PE, PXD, SLB, WPZ, XOM, AMLP21 Comments
Elliott Gue profile picture
Elliott Gue


  • US short-cycle plays appear poised to take market share, though oil prices and the capital markets will dictate the pace at which this process occurs.
  • Ongoing cost savings from technological advances and better understanding of shale geology continue to improve economics and unlock new resources.
  • In this intensively competitive environment, basins and individual operators will jockey for market share within the US.
  • M&A activity over the past 18 months has centered on Delaware and Midland Basins in Texas and the STACK play in Oklahoma, where multiple formations create superior economics.
  • Midstream MLPs remain our favorite way to play this volumetric growth story, with a focus on names with strong balance sheets and high-quality assets.

The ability of shale oil and gas producers to adjust to price signals relatively quickly should enable the US to take market share by responding to growing global demand for petroleum products and offsetting output declines related to aging fields and industry underinvestment.

In addition to the short-cycle nature and predictability of US shale plays (bad wells aside, dry holes don’t happen), the industry continues to refine its drilling and completion techniques and processes to drive break-even costs lower and unlock additional resources.

Every earnings season, companies in the oil-field services industry highlight emerging technologies that can help upstream operators to improve their well productivity, boost operational efficiency, and reduce per-barrel production costs. (Read our full roundup in Oil-Field Services: The Tale of Two Cycles Continues.)

For example, Paal Kibsgaard highlighted Schlumberger’s (SLB) recently introduced AxeBlade drill-bit, which increased the penetration rate on Matador Resources’ (MTDR) horizontal wells in the Permian Basin by 35 percent.

The company also spotlighted its PowerDrive Orbit rotary steerable system, which sold out for the third consecutive quarter and helped Parsley Energy (PE) to reduce its average drilling time in the Midland and Delaware Basins by 17 percent and its cost per lateral foot by about 30 percent.

Baker Hughes (BHGE) likewise touted the growing popularity of its AutoTrak rotary steerable franchise, which accounts for about 80 percent of the company’s drilling margins and significantly reduces the time needed to sink longer horizontal wells that target the formation’s most productive horizons.

Halliburton’s management team set aside time on its first quarter earnings call to focus on the company’s efforts to improve efficiency and reduce costs by leveraging big data, machine learning, and other digital technologies to automate drilling and completion processes - topics that came up repeatedly at the DUG Permian Basin Conference we attended

This article was written by

Elliott Gue profile picture
Elliott Gue knows energy. Since earning his bachelor’s and master’s degrees from the University of London, Elliott has dedicated himself to learning the ins and outs of this dynamic sector, scouring trade magazines, attending industry conferences, touring facilities and meeting with management teams. For seven years, Elliott Gue shared his expertise and stock-picking abilities with individual investors through a highly regarded, energy-focused research publication. Elliott Gue’s knowledge of the sector and prescient investment calls prompted the official program of the 2008 G-8 Summit in Tokyo to call him “the world’s leading energy strategist.” He has also appeared on CNBC and Bloomberg TV and has been quoted in a number of major publications, including Barron’s, Forbes and the Washington Post. In October 2012, Elliott Gue launched the Energy & Income Advisor (www.EnergyandIncomeAdvisor.com), a semimonthly online newsletter that’s dedicated to uncovering the most profitable opportunities in the energy sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships. Roger Conrad also contributes analysis of master limited partnerships and Canadian energy stocks to the publication. The masthead may have changed, but subscribers can expect the same in-depth analysis and rational assessments of investment opportunities in the energy sector.

Analyst’s Disclosure: I am/we are long EOG, CXO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.