The Biggest Texas Oil Fields Producing Today

When they say everything is bigger in Texas, they’re not kidding. The state holds the two largest oil-producing fields in the country.

Matthew DiLallo
Mar 31, 2017 at 12:30PM

Texas is the nation's largest oil-producing state, accounting for about 25% of the total. Fueling that output is a combination of legacy oil fields and new shale discoveries, especially those in the Permian Basin of west Texas, which alone contributes 14% of the total U.S. oil output.

While there are thousands of oil fields spread across the state, many don't produce that many barrels of oil each month. Instead, the bulk of the state's production comes from just two monster oil fields: the Permian Basin and the Eagle Ford shale. Here's a closer look at why these are the two largest oil-producing fields in the Lone Star state.

The shale layer cake

According to the U.S. Energy Information Administration, the Permian Basin currently produces nearly 2.3 million barrels of oil per day, more than double what the field did a decade ago. That output comes from several producing fields and rock formations, the largest of which are the Spraberry and Wolfcamp trends: 

DATA SOURCE: EIA. 

Those shale layers are also responsible for the bulk of Texas' oil production growth in recent years. Fueling that growth is the fact that oil saturates these rocks, which enables producers to extract it for a relatively low cost. The Spraberry and Wolfcamp, for example, contain an estimated 75 billion barrels of oil equivalent recoverable resource potential, according to Pioneer Natural Resources (NYSE:PXD), making it one of the largest oil fields in the entire world. However, what has proven to be a game changer for production in recent years is the move from drilling vertical wells to horizontal drilling, which, as the following chart shows, started in 2011:

DATA SOURCE: PIONEER NATURAL RESOURCES INVESTOR PRESENTATION.

The reason output surged is due to the stunning impact horizontal drilling has on production per well. A few years ago, Pioneer Natural Resources noted that a typical vertical well in the basin would produce 140,000 barrels of oil equivalent over its 30- to 35-year lifetime. However, with a horizontal well, Pioneer could do that in just six months.

Meanwhile, on the other side of the Permian Basin is the Delaware, which is home to the Bone Springs and Wolfcamp formations, which according to some estimates hold as many as 60 billion barrels of oil equivalent resources. Shale drillers EOG Resources (NYSE:EOG) and Devon Energy (NYSE:DVN) are among the many that have targeted those layers in recent years to drive production growth. EOG Resources drilled 17 Wolfcamp wells last quarter, which delivered an average initial production rate of nearly 1,600 barrels of oil per well. EOG estimates that it can drill more than 2,600 future wells in that formation alone, accessing as much as 2.9 billion barrels of oil equivalent resources. Devon Energy, meanwhile, is in the process of ramping up its drilling efforts into these layers, planning 100 more wells this year, which would grow its production 20% by the end of this year.

Down but not forgotten

Texas' other monster oil field is the Eagle Ford shale, which was only discovered in 2008. However, after delivering explosive production growth over the next several years, the play fell on hard times due to the oil market downturn. In fact, after peaking in 2015 at roughly 1.6 million barrels per day, the Eagle Ford's output is down to roughly 1.1 million barrels per day. That's after drillers like Pioneer Natural Resources stopped drilling in the play last year because of low oil prices, while EOG and Devon both cut back significantly.

However, that trend should reverse this year. Not only has Pioneer resumed its drilling program, but EOG and Devon plan to drill and complete more wells this year, though they all see the Permian fueling the bulk of their growth this year. Meanwhile, several other drillers are ramping up their Eagle Ford activities this year, including Sanchez Energy (NYSE:SN). Fueling Sanchez Energy's plan is its recent joint venture with a private equity giant to acquire Anadarko Petroleum's (NYSE:APC) underutilized Eagle Ford acreage for $2.3 billion. Sanchez intends to leverage its increased scale to ramp up drilling on the former Anadarko land, as well as its legacy acreage, anticipating 30% compound annual production growth over the next three years.

Meanwhile, as oil prices improve, other oil companies are likely to ramp up spending in the Eagle Ford. EOG, for instance, has more than 7,000 remaining drilling locations on its industry-leading land position. Meanwhile, Pioneer and Devon both hold large acreage position that they could develop or sell to other drillers that, like Sanchez, could use it as a springboard for production growth.

Investor takeaway

When it comes to oil fields, everything is bigger in Texas as the state controls not one but two of the largest producing oil fields in the country. What makes these fields so large is that they hold a vast supply of low-cost oil, making it easy for drillers to maintain and grow production. Speaking of growth, with billions of barrels still in the ground, these monster fields should continue to produce for decades to come, enabling Texas to keep its crown as the country's top oil state.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of Devon Energy and EOG Resources. The Motley Fool has a disclosure policy.

Permania: 100 Years In The Permian Oil Fields Of Texas And New Mexico

 

The Permian Basin oil field in southeast New Mexico and west Texas first started producing shortly after World War I. But almost 100 years later, it seems to keep getting better, and may become the world’s biggest oil field. A combination of new technologies and global price wars has kept the basin amazingly productive.

There’s actually a word for this - it’s called Permania. And it’s on the lips of everyone in the oil & gas industry.

There are several huge oil fields famous throughout the world. The Ghawar field in Saudi Arabia, discovered in 1948, is considered the biggest and the best known, producing about 5 million barrels per day, with estimated reserves exceeding 70 billion barrels. And this is above the 70 billion or so already extracted. Ghawar is why Saudi Arabia leads OPEC.

But the Permian Basin, a 300-mile expanse from west Texas to southeastern New Mexico, is headed to becoming the biggest in the world. It is now the largest producing basin in the United States, having yielded almost 30 billion barrels of oil and 75 trillion cubic feet of natural gas. Currently, the Permian is pumping about 2 million barrels of oil a day.

It’s gotten so busy that the town of Carlsbad, New Mexico, has nary a vacant room given the many oil and gas people coming through. And they’ve been building new hotels as fast as they can.

The Permian Basin is almost unique in that it has so many oil and gas producing rock formations stacked one on top of each other, called multiple stacked plays, each of which is more than a thousand feet thick, ranging in depths from a few hundred feet to five miles below the surface.

opus operating - permian basin

Map of the Permian Basin in southeast New Mexico and west Texas showing the multiple stacked producing zones in cross-section. Even after 100 years of production, the Permian Basin is producing more oil and gas than ever, thanks to new technologies and strategies.

Eighty percent of the reserves are located at less than 10,000 feet in a dozen or so stacked zones including the Yates, San Andres, Clear Fork, Spraberry, Wolfcamp, Yeso, Bone Spring, Avalon, Canyon, Morrow, Devonian, and Ellenberger formations.

In contrast, the Eagle Ford field in east Texas, another big field, has producing zones only two to three hundred feet thick.

According to Scott Sheffield, Executive Chairman and CEO of Pioneer Natural Resources, the Permian will end up being bigger than the Ghawar field, with more than 75 billion barrels in the Spraberry and Wolfcamp plays alone, 40 billion barrels in the Delaware, and more in new zones being discovered, like the Wolfcamp C. Sheffield thinks the totals will exceed 160 billion barrels.

The primary producing rock types are limestone, dolomite and sandstone that have high porosities. But advances in horizontal drilling and hydraulic fracturing have expanded production into unconventional, tight oil shales such as those found in the Wolfcamp formation.

In fact, it is precisely the technological advances that have opened up the Permian so much, innovations that have increased oil recovery from 5-7% only last year to 15-20% in 2017.

‘The reason productivity is dramatically increasing in the Permian Basin,’ says David Zusman, Managing Partner of Talara Capital Management, ‘is that there is directional drilling with longer laterals (horizontal drill lengths away from the vertical shaft), rising proppant intensity in wells (the particles that keep fracked wells open), tightening frac cluster spacing, and a shift to multi-well pad drilling - everything that allows operators to better stay in the producing zones and get more out of them. It has made the Permian the lowest cost basin in the United States, and likely the all-important marginal barrel globally.’

Surprisingly, the rig count isn’t as much of an indicator as it used to be, because each of those rigs are producing more. Rig count in the U.S. went from over 1,600 in 2014 to 350 at its lowest, and is now back up to 700 or so. But those 700 are producing more than ever before.

Some of these drill rigs can even walk around on their own from well to well (see figure).

A Patterson-UTI APEX WALKING drilling rig, operating in the Permian Basin, uses hydraulic feet to walk from one drill site to another, able to move forward, sideways or in a circle with pipe racked back, without the need to move other primary equipment. These new technologies have not only reduced cost and increased efficiency, but have played an important role in the evolution of the industry in response to external forces like the recent Saudi-U.S. oil war.

According to SeakingAlpha, there were 285 horizontal/directional drill rigs operating in the Permian Basin at the end of March 2017, with 43 new rigs added in just the last two months.

The amazing productivity of the Permian Basin comes from its geologic history. From about 850 to 310 million years ago (from the Precambrian to the Mississippian), the ancestral Permian Basin was a shallow marine margin on the edge of a vast western sea, slowly accumulating marine carbonates, sediments and shales.

Then during the Permian, beginning about 300 million years ago, the North American continent collided with Gondwana Land (a supercontinent that later split apart into South America and Africa). This violent compression created two deep sub-basins, the Delaware and the Midland Basins. These filled with clastics (sediments like sands and gravels), and were surrounded by shallow shelves that precipitated carbonate rocks from reefs and shelled organisms of the shallow sea.

After that, the basins became slowly shut off from the ocean, intermittently flooding and evaporating for millions of years, precipitating thousands of feet of salt, some very pure and tight. The effect was a deep basin filled with marine sediments, capped by tight formations, in which the dead marine organisms were eventually pressed and cooked into oil and gas.

Since these formations include both porous and tight rocks, the oil was able to be extracted with increasingly innovative technologies, from traditional to advanced, over the last century.

As the Permian Field approaches 100 years in age, and as our ability for technological innovation shows no sign of slowing down, production from this basin will show no sign of slowing down either.

Dr. James Conca is an expert on energy, nuclear and dirty bombs, a planetary geologist, and a professional speaker. Follow him on Twitter @jimconca and see his book at Amazon.com

The Shale Enlightenment: New Evidence From Apache's Latest Find

Summary

  • Apache's latest "discovery" supports the shale enlightenment thesis and it's major implications.
  • Apache did not discover a new rock layer, petroleum deposit, or invent a new technology. All it did was challenge industry dogmas.
  • The fact that this is all it takes to "discover" a major new field provides an illustration for what investors should expect from the shale enlightenment going forward.

As I've written before, the so-called "shale revolution" is not as much a technology-driven revolution as it is an ideas-based enlightenment. This distinction is more important than most people can even imagine. An ideas-based enlightenment opens untold opportunities, whereas a technology-driven revolution is limited in scope.

Apache's (NYSE:APA) recently announced Alpine High "discovery" is just another example of this. Apache did not discover a new rock layer or petroleum deposit. Nor did it invent a new technology. As described in a recentWSJ article, Apache was simply willing to question an existing dogma, conduct experiments to challenge that dogma, and once they were convinced the old dogma was wrong, they scooped up all the appropriate acreage. Shockingly, it's not much more complicated than that.

The complicated part is understanding why these dogmas exist in the first place, why it has been so rare for companies to challenge these dogmas in the past, and why it has become more common for them to do so in the past decade. As I've argued elsewhere, the mathematical formulas taught to petroleum engineers around the world do not support the notion that we can produce from shale formations. When the formulas are applied to nano-scale porosities, they simply say that the hydrocarbons in such formations will not flow: Fracking or no fracking, horizontal drilling or no horizontal drilling, they simply will not flow!

However, the experiences of the past decade have clearly demonstrated that these theories are missing something. The position of the industry before the shale revolution was analogous to someone attempting to use Newtonian physics to understand the behavior of black holes and quantum particles. Without the more advanced theories of general relativity and quantum mechanics they would have been utterly lost.