Permian Basin shale production should rise by as much as 300K bbl/day by year-end, according to the Wood Mackenzie consultancy, with oil production from the largest U.S. oil field next year approaching or surpassing the 2.7M bbl/day mark.
The strong outlook comes as investors sold off shares in a range of Permian producers after Pioneer Natural Resources (NYSE:PXD) earlier this month reported a surprise increase in gas production at its Permian wells, even as its oil output remains on the track with the expectations of its engineers; Parsley Energy (NYSE:PE) also reported additional gas output alongside oil volumes it said were in-line with forecasts.
Noting that wells tend to produce more natural gas as they age, Morgan Stanley analysts say the phenomenon has been hard to see in the Permian as companies have been growing at a breakneck pace, drilling new wells that are flush with oil.
“We think it's execution risk that's the culprit” behind investor concerns, says RBC analyst Scott Hanold. “The Permian is going to have some growing pains.”
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