Oil & Gas /

Permian Basin, Texas and U.S. each declined in count of active drilling rigs during May, according to weekly reports from Baker Hughes.  As of May 31, Permian Basin reported 310 rigs (down from 312 the previous week, 348 the previous year and 317 to start the month), Texas reported 287 (unchanged from the previous week, down from 353 the previous year and 297 to start the month), and U.S. reported 600 (unchanged in past week, down from 696 the previous year and 622 to start the month).  In New Mexico, there were 107 rigs (down 1 in past week, unchanged in past year and in May).

Oklahoma (down 1 in past week) and Louisiana (up 1) each has 42 rigs, and North Dakota has 32 (unchanged).  Eagle Ford is No. 2 among basins with 51 rigs (up 1) followed by Haynesville with 36 (unchanged), Williston with 34 (unchanged) and Marcellus with 27 (up 1).

New Mexico’s Eddy (down 1 to 53) and Lea (unchanged at 50) lead the Permian Basin followed by Martin with 33 (up 1) and Loving and Reeves each with 23.  Also, Midland reports 20 rigs (down 1), Reagan has 18, Upton 14, and Howard and Ward 10 each.

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Suwanee, Ga.-based Future Technologies Venture said recently it will open an office in Midland in 2Q to serve the oil and gas industry in Permian Basin.  “This is a dynamic industry in a dynamic environment,” Valerie Sciortino, head of site development for Future Technologies, said.  “Having more immediate access to our clients and their real property and assets will have a great impact on how we scale and deliver to our partnerships.”

A branch manager will direct a staff of communication technicians, fiber technicians and other team members.  Services will include ground and tower construction, broadband installation, and tower and ground audits to build communications networks for industry.

Pete Cappiello, CEO, told the Midland Reporter Telegram the company designs, builds and provides wireless and wired equipment at energy production sites.  These networks connect field workers with their offices and facilitate automation in the “digital oilfield.”  Dave Rumore, chief revenue officer, added, “We see major drilling sites as not just drilling sites.  They’ve become communications hubs.  With the vast distances (in the Permian Basin), you can’t have people driving from site to site.”

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Analysts at Wood Mackenzie said last week the $22.5 billion recently-announced acquisition of Marathon Oil by ConocoPhillips could make the company the third largest producer in the U.S. lower 48 behind ExxonMobil and Chevron/Hess.  Alex Beeker, research director, said May 30, “The addition of Marathon further solidifies ConocoPhillips in a league of its own with few true peers.  For ConocoPhillips this is a diversified and balanced move across multiple geographies.”

Upon the addition of Marathon’s 390,000 boed, ConocoPhillips will produce 2.3 million boed – including 1.5 million boed from U.S. lower 48.

Beeker added, “Marathon provides ConocoPhillips with optionality and assets that immediately compete for capital.  Marathon’s average well performance in Bakken and Delaware over the past two years has exceeded ConocoPhillips.”

ConocoPhillips’ acquisition of Marathon assets in Permian, Eagle Ford and Bakken was announced May 29.

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Tommy Taylor
PBPA Chairman

Another trip to Washington D.C. is in the books. Several Permian Basin Petroleum Association members, along with Ben Sheppard and Stephen Robertson, made the trek to D.C. back in early April. PBPA staff and our new federal consultant, Mr. Glenn LeMunyon, arranged for the group to meet with several members of Congress on Capitol Hill. Overall, I believe it was a worthwhile trip during which we shared our hopes for the future and our current concerns about the never-ending list of federal regulations that are challenging our industry.

Many of the federal regulations opposing our industry (a report from the Institute for Energy Research has tracked over 200 actions taken by the current administration against the oil and gas industry) are onerous and not well written, while others are just draconian and punitive. It appears that these changes are being pushed out of D.C. with the purpose of causing harm to the oil and gas industry. Imagine that! Oil and gas companies are spending an incredible amount of time, effort, and resources to comply with the flavor of the day regulations, and it doesn’t appear that the result of the new rules yields anything substantial, other than drive up costs and make operations more problematic and less certain. The PBPA has always taken the stance that we are not against regulations per se, but we need reasonable regulations, ones that make sense and are based on science and facts. I don’t have any doubt that we will all continue our efforts to be responsible operators and produce our products in a manner that meets the needs of our customers and achieves the requirements of the regulations we must all operate under. The PBPA group was able to reiterate this message as we went from office to office.

Thankfully, it seems the efforts of some “zealots” to change the American energy landscape to the land of all renewables, and green everything, is being met with a healthy dose of skepticism by the general public, which is good to see. I certainly don’t understand the rationale of picking one form of energy over another. We need more energy, not less. We are not in an energy transition; we are in an energy expansion that has been accelerating worldwide since the 1850s. Yet while the “green” energy movement (renewables) is being dictated to the American public, we are seeing a renewed interest in what our industry provides and hopefully an understanding of just how ridiculous the idea is of simply doing away with the fossil fuel industry. While renewables have seen tremendous growth in the last decade, growth in fossil fuel production actually exceeds growth in renewables during that same time period. In this energy expansion, replacing 102 million barrels per day of global energy usage is a task that is proving to be downright impossible. I am hopeful most people will see the absurdity in the efforts to simply do away with the world’s major source of energy and be realistic about needing all forms of energy to advance society.

All the Congress members are now aware of the Permian Basin province and the general size and location of this enormous resource. I recall a D.C. trip back 10 years ago when most Congressmen had no idea what the Permian Basin represented, much less where we were located. That has thankfully changed now that we are providing record levels of oil and gas production. Given that the Russia Ukraine war and the Palestine Israel conflict are ongoing, can you imagine the oil price shock we might well be suffering through? Yet, most don’t give it a second thought. The significance of the United States having 6.3 million barrels of production in the Permian Basin cannot be understated.  Even if the average American doesn’t appreciate this strategic position, we certainly do, and it is our obligation to keep providing these energy resources to the market. Thank you for all that you do to keep our country moving forward and providing the energy supply that powers our tremendous economic engine.

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Houston-based Select Water Solutions said recently its collaboration with Occidental Petroleum in Midland Basin has treated and recycled 50 million barrels of produced water.  The South Curtis Ranch treatment facility has been operating since March 2021.  John Schmitz, chairman, president and CEO of Select, said May 20, “Reaching this milestone at one of our flagship facilities is a testament to the hard work and dedication of both teams.  This facility not only delivers value to our operator partners, but also provides significant environmental benefits to the community.”

Select Water said the facility exemplifies “the advantages of long-term water programs and infrastructure designed to collect produced water from a network of production wells thereby reducing freshwater consumption and waste.”

Thaimar Ramirez, president of Oxy’s Midland Basin business unit, added, “By treating and reusing produced water, we use technology and collaboration to reduce water consumption and preserve a precious resource.”

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Texas Workforce Commission recently said employment in the upstream sector of the Texas oil and gas industry grew by 4,500 jobs in March.  It’s the largest single month of growth in upstream jobs since June 2011.  Since a low point in September 2020 during a global pandemic, the months of increase in upstream oil and gas employment in Texas have far outnumbered months of decrease (33 to 9).  During that time industry has added 39,500 Texas upstream jobs, and these jobs pay among the highest wages in the state.

Todd Staples, president of the Texas Oil and Gas Association, said April 19, “These job gains mean economic growth for Texas communities and families, energy security for the U.S., and much-needed stability for our trading partners around the globe.”

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Federal Trade Commission on Thursday approved ExxonMobil’s $64.5 billion purchase of Pioneer Natural Resources, but FTC issued a consent agreement that prevents Pioneer founder and former CEO Scott Sheffield from serving on the Exxon board of directors or serving as an advisor based on allegations he attempted to collude with OPEC to raise oil prices.  FTC said, “Former Pioneer CEO Scott Sheffield coordinated efforts with U.S. shale oil producers to constrain their production and raise energy prices.”  FTC said Sheffield used his influence “to align oil production across the Permian Basin in west Texas and New Mexico with OPEC.”

Pioneer said in a statement issued Thursday, “We disagree and are surprised by the FTC’s complaint.  Mr. Sheffield and Pioneer believe that the FTC’s complaint reflects a fundamental misunderstanding of the U.S. and global oil markets and misreads the nature and intent of Mr. Sheffield’s actions.”

Early on Friday ExxonMobil said it closed its acquisition of Pioneer.  It becomes the largest oil producer in the Permian Basin – doubling output to more than 1.3 million barrels of oil equivalent per day.  The combined company has more than 1.4 million net acres in Delaware and Midland basins with an estimated 1.6 billion barrels of oil equivalent.

Sheffield retired as Pioneer CEO in December.  The company he founded was the biggest producer in Permian Basin.  FTC said he now serves on the board of The Williams Companies.

FTC said the vote to accept the consent agreement was 3-2 with the chair and two commissions supporting the agreement and two commissioners dissenting.  The sale was announced in October 2023.

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Enverus Intelligence Research said Tuesday it expects power demand in far west Texas to more than double by 2040 because of electrification trends, including potential electrification in the oil and gas industry, and cryptocurrency mining growth.  “We believe the far west zone in ERCOT will see enough load growth to support significantly more renewable development without curtailments,” Riley Prescott of Enverus said.  “The far west will need a large power generation buildout to meet the forecast load growth.  Without it, we expect power prices in the area will rise significantly.”

Enverus added, “Natural gas combustion, specifically compression, is the most practical emission source to electrify by connecting to the grid (because) these emissions mostly come from stationary sites with long expected lives… A fundamental shift began in 2022 as load growth increased relative to wellhead gas production.  This was due to early electrification efforts in the Permian Basin and a migration of cryptocurrency mining load to Texas.”

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Drilling Rig Platform at dusk in New Mexico – USA

The oil and gas industry in New Mexico in 2024 is like a boxer who keeps taking hits, but remains standing. Some hits are glancing blows, and some are near misses. From legislative to legal to development of the southeastern corner of the state, there are challenges—and opportunities in the year ahead for New Mexico’s slice of The Permian Basin.

Amidst a complex web of legislative battles, economic importance, and shifting regulatory landscapes, the oil and gas industry in New Mexico stands as a major pillar of the state’s economy while constantly facing a myriad of challenges.

The overarching picture for New Mexico is mixed: there is a lot to look forward to and a lot to be concerned about. New Mexico’s increase in production is increasing to new heights. As a matter of fact, the state is headed for a $3.5 billion general fund surplus for the year running through June 2025, according to a new forecast—all the while anti-oil and gas legislation and court threats loom constant and large.

Permian production will increase by 380,000 barrels per day between January and December 2024, accounting for 94 percent of forecast production growth, according to the Energy Information Administration. New Mexico’s slice of that pie is not a small one. In fact, with the increasing demand that makes New Mexico the second-highest producer of oil and gas after Texas, innovative and ambitious projects such as the Dune Express have taken shape.

Terminating in Lea County, New Mexico, the Dune Express, by Atlas Energy, will transport frac sand from Kermit, Texas, to Lea County in New Mexico. With the proposed capacity of 13 million tons of proppant a year, this project is under budget and on time and is scheduled to be completed by the end of 2024. The ability to get that much sand to New Mexico is crucial: it would remove thousands of heavy trucks per year off the public roads and onto the lease roads, where the weight considerations are not as stringent as on public roads. It eliminates all the associated risks that come with more heavy industrial traffic. Even though The New Mexico Department of Transportation is investing hundreds of millions of dollars on road improvements in their portion of the Permian, the addition of alternative product transport is welcome.

“Among the grasslands and yucca plants, a drilling rig stands in New Mexico off highway I-80 near Artesia.”

A significant opponent of New Mexico’s oil and gas industry is surprisingly New Mexico itself. Impacted by legislation and lawsuits, the industry operations and state’s budget are under attack. Greg Nibert, New Mexico State Senator from District 27 in Chaves County, speaking at a luncheon of the Permian Basin Petroleum Association in Midland, addressed some of the legislative punches that were aimed at the industry but fortunately never landed soundly. Of particular concern was House Bill 133, which sought to amend the state’s Oil and Gas Act. The senator expressed reservations about potential regulatory changes, citing fears of increased administrative burdens and challenges to the industry’s established framework.

“The governor wanted to open up that act, and I would submit to you that opening up that act would not have been a friendly gesture on her part that would make it easier for you to do business in New Mexico,” Senator Nibert cautioned. “In fact, I would say it [would] make it more difficult.”

Fortunately for the industry, HB 133 was remanded to the unceremonious designation of “Action Postponed Indefinitely.”

All, however, is not Gucci, as they say in the field. The anti-oil sentiment was plain. Other oil-unfriendly legislation was deflected, but only by sidelining it with, again, that uneasy label of “Action Postponed Indefinitely.” Such was the fate of bills in both the house and senate that would have required feasibility studies for setbacks. Imposed regulation on a setback could easily curtail and prohibit a significant number of production operations. However, the specter remains that these bills will see re-introduction (in one guise or another) at the next legislative session.

A bill announced from the New Mexico Oil and Gas Association, known as SB 249, would have created a state reclamation fund that would have received $5 million a month from state oil and gas taxes, as well as be eligible for federal funds. It would have been used to fund the Oil Conservation Division (OCD) such that it might enforce the Oil and Gas Act. This bill also died on the table. However, the specter remains that these bills will see re-introduction at the next legislative session.

Another controversial legislative development was the introduction of House Bill 48, which would have raised the royalties paid by operators in the state from 20 percent to 25 percent. It was argued that raising this amount would directly impact smaller operators who could not survive the increase. As Jared Hembree noted: “This unilateral decision will also have unintended consequences. Oil and natural gas producers will question the State Land Office’s commitment to conducting a fair and consistent leasing process, which could drive down future leasing bids or result in producers taking their operations to other states, resulting in the loss of high-paying jobs, reduced economic activity, and lower state and local government revenues.”

The assault against the New Mexico oil and gas industry takes many forms, both legislative and administrative.

Indeed, a complaint filed last year by the Center for Biological Diversity as well as WildEarth Guardians, along with New Mexico residents and groups, accuses the state of failing in a constitutional obligation to protect the environment by allowing oil and gas production. This suit has the power to cripple New Mexico’s oil and gas industry. The Independent Producer Association of New Mexico’s Jeff Wechsler told the judge presiding over the case that, “IPANM members have invested hundreds of millions of dollars in their oil and gas businesses, interests, permits, facilities. They depend on the continuation of the current regulatory scheme for their livelihoods.”

Shot in the oil fields near Carlsbad, NM.

A difficult political environment perennially presents challenges for the oil and gas industry in New Mexico. New Mexico follows behind California in that it attempts (and often succeeding) in enacting policies similar to California’s. This does not bode well for the specific needs of New Mexico. Indeed, despite these legislative hurdles, Senator Nibert, in his talk at the PBPA, acknowledged the industry’s economic significance to New Mexico. With more than 50 percent of the state budget directly tied to taxes and revenues generated by oil and gas activities, the sector remains a crucial driver of economic growth and stability. However, this economic importance also underscores the industry’s big stake in the Land of Enchantment, a situation that bespeaks vulnerability to policy shifts and regulatory changes.

“The fact of the matter is New Mexico is dependent upon your production,” Senator Nibert emphasized. “There’s no other way of saying it.”

Economic activity in the Basin has seen an overall significant uptick, and New Mexico has seen its fair share of that growth. The areas in and around Carlsbad are still being worked over by operators, and continue to add not insignificant revenue to the state’s coffers.

Looking ahead, the oil and gas industry in New Mexico finds itself at a critical juncture, balancing economic imperatives with environmental concerns and regulatory pressures. As the sector continues to adapt to evolving market dynamics and policy landscapes, collaboration between industry stakeholders, governmental bodies, and advocacy organizations will be essential to ensuring its resilience and sustainability in the years to come.

Christian Lombardini, who works in the oilfield, is also an author, father, and entrepreneur. He’s founder and host of the Oil Field Leader Podcast. Christian shares insights and content on LinkedIn.

Sources: apnews.com, fastdemocracy.com, nmlegis.gov, soucenm.com, eia.gov, kunm.org

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Midland-based ProPetro Holding Corp. said Monday it reached agreement with ExxonMobil to provide electric hydraulic fracturing services in the Permian Basin.  The three-year agreement includes deployment of two electric hydraulic fracturing fleets and wireline and pumpdown services in first half of 2024.  There is an option for a third fleet early next year.

Sam Sledge, CEO, said, “We’re thrilled to announce a key strategic step for ProPetro as we strengthen our longstanding relationship with ExxonMobil… By introducing our electric fleets, we’re moving toward a more sustainable and industrialized future together.”  ProPetro provides completion services to upstream oil and gas companies engaged in exploration and production of unconventional oil and natural gas resources in North America.

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