Insight
The reluctant giant: why Permian gas keeps growing on oil's terms
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
Permian gas is a captivating yet divisive topic. The huge resource base is growing. West Texas price realizations are rapidly improving and the broader regional gas market is expanding. But oil continues to drive the basin forward and opportunity costs are a critical consideration of what gets drilled when. Developing gas-weighted projects in earnest will always be weighed against oil opportunities. Higher Waha profoundly changes gas-weighted returns but a scenario where E&Ps flip the script and produce gas because they want to – not because they need – remains unlikely. Budgets won’t allow it.
Table of contents
- Executive summary
- Industry expects more Permian gas
- Waha bounces back
- No clear capital allocation pivot
- The heart of the issue: opportunity costs
- The case for adding gas capex – and why it's harder than it seems
- Company implications
- Going forward
- Appendix: It still starts in the ground – an example
Tables and charts
This report includes the following images and tables:
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Permian gas forecasts drift higher (2023 to present)Permian gas prices and basisPermian EUR composition (90 sub play / reservoir combinations)
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Permian supply nodes – IRR impact of US$6/mmbtu Waha instead of US$1/mmbtuEscalating Permian returns from various gas weightingOverall US Lower 48 gas growth outstrips the PermianPermian capex shifts – Woodmac coverage universePercent gas reserves of remaining Permian 2P volumesOverview orientation map (Saddle horizontal wells since 2010)Saddle sub play productionSaddle wells: strong gas recovery
What's included
This report contains:
