Investors Continue to Shy Away from Permian as Production Growth Slows
A continuing drop in capital allocation and spending by Permian-focused drillers in recent quarters lends support to an emerging view that unconventional production from the Permian Basin in West Texas and New Mexico might have reached or is nearing its natural peak. Permian oil and natural gas production has grown steadily in recent years, as strong capital inflows, improvements in fracking technology, and the debottlenecking of pipeline infrastructure in Texas and the Gulf Coast region all coincided to boost output. According to EIA data, Permian oil production rose by approximately 23% during 2019, from 3.8 million barrels per day (bbls/d) at the beginning of the year to over 4.7 bbls/d by the end of December. But the rate of production growth and associated investor returns have slumped in recent quarters, partly on account of the drop in oil-to-gas ratios for existing Permian wells. Evidence of this gassier output mix also comes from data published by the Texas Railroad Commission, which granted a record number of gas flaring permits during 2019.