Four Mile Laterals in the Permian Basin
We have previously shown you, pretty clearly, I believe, that Permian HZ tight oil production is still inching up, ever so slowly, in spite of fewer rigs running in the basin, because of longer laterals.
65-70% of the wells now being permitted in the Basin are three or four-mile laterals. They are more cost effective to drill; notice I did not say more economical, or profitable. They have higher IP180-360s, which means operators can get more of their D, C and land costs back, faster. With oil prices below $60 that is the only hope the sector has to stay alive another day...cash flow.
You can stick with the plan and call these longer laterals "efficiency" if you need to, for me it's just an extension of common sense; drilling rigs just drill holes in the ground.
Four-mile laterals are harder to drill and increase risks for cost overruns significantly. For the two biggest operators in the Basin, Exxon and Diamondback they cost over $12MM each, minimum, with M&A costs per drillable location included.
I am not going to go through all that again because I know people are sick of it...below $60 WTI on the NYMEX a $12 MM well requires 660,000-800,000 gross BO to the 100% to pay out, after all full cycle costs are deducted. Thats the number when you include all the costs you should include.
Associated gas and NGLs help, but only if you are Exxon, Chevron and/or Oxy. Otherwise you are saddled with WaHa.
Above is a very important chart you've seen before for all HZ wells drilled in the Permian Basin since 2016. This chart will be the baseline, so to speak, for comparing four mile, then three-mile laterals in the Permian to see how they are measuring up in terms of productivity. I've picked three points in the well's lives, 7, 60 and 90 months and estimated the cumprod. from the average of all wells drilled in in the Basin beginning 103 months ago.
Please note these well profiles are normalized for lateral lengths. This charts clearly shows well productivity has been declining since 2016 and that rate of decline seems to have increased since 2023. Novi has suggested elsewhere this decline is probably related to something it calls "degradation" from parent and child well interference. I am good with that speculation but would rather simply call it pressure depletion from drilling wells too close together.
Drilling longer laterals in the Permian is covering up, masking over this decline in well productivity. The future of the Basin is pretty much dependent now on where the money is going to come from to drill future wells, and how much there is left to drill 3 and 4-mile laterals.
Four Mile Laterals in the Midland Basin
Here is a map of the Basin with 260) 4-mile laterals in it, the oldest from 2020 in Borden County. I wrote about them 5 years ago; they were awful.
I believe more 4-mile laterals are being drilled in Tier 3/4 acreage, like NE Howard, and Borden Counties because there is simply more room for them TO be drilled. Over in Midland and Martin Counties, 4 mile laterals require illegal pooling (allocation) and they are all exceptions to Statewide Rules 37 for distances to unit lines and between wells, or Statewide Rule 38 for insufficient acreage in the DU. It's really crowded in Tier 1 and 2 cores. You've heard me rant recently about what defines remaining Tier 1 and 2 drillable locations below $60 and its mostly remaining areas that have to room to drill 3 and 4-mile laterals.
The average mean EUR for Midland Basin is 435,000 BO, according to Novi.
Compare this chart specific for 4-mile laterals in the Midland to the base-line chart for all wells in the Permian since 2016. They are better, for sure, by as much as 50% better at month 19. The only place four-mile laterals exceed the mean average EUR for the typical Midland Basin HZ well is Midland County (Exxon), with Martin back in second place (Diamondback and Exxon). Elsewhere in the Basin they don't exceed the mean average for EURs at all. There are a few exceptions to that, but not many and not consistently.
So, 4-mile laterals are the best where all the other wells are the best, in the cores of Midland and Martin Counties. They don't make more oil, as in higher EUR's, they just make it faster.
You can decide how many of these super long 4 milers will make enough oil at prices < $60 to reach payout.
Four Mile Laterals in the Delaware Basin
In spite of the Delaware Basin being the wild west with visions of wide-open spaces to drill 4-mile laterals, only 10% of all 4 milers in the Permian are in the Delaware and most of those belong to Exxon in Eddy County.
There are Federal BLM leasing issues, proximities to potash mine set asides and rock quality/geological reasons that may contribute to that. It's easier to drill super long 4-mile laterals in dense mudstone (shale) than in the most prolific benches in the Bone Springs but its the Bone Springs that is the war horse in the Delaware.
Above is the cumulative oil vs. time well profile chart for Delaware Basin wells. The two most prolific counties for tight oil production in the entire Permian are Lea and Eddy County, New Mexico so it should be no surprise those two counties are where the best four milers are located, particularly, Eddy County.
These Delaware wells are not very old so we can only compare their productivity with all other Permian Basin wells at month 7 and they are better, for sure. Significantly better. Perhaps 80K-100K BO better approaching the two-year mark. Below $60 that would have an enterprise value to the working interest of an additional $1.6 MM, net.
I don't believe there is as much pressure depletion going on in the Delaware as in the Midland, spacing is better, wider, but mostly this productivity improvement is related to the best rock in all of the Permian, the Bone Springs.
I am working on well costs for 4-mile laterals in the Delaware. They are too young to be able to predict EUR's but their IP180s are higher, but then seem to decline faster than in the Midland.
Four-mile laterals seem to work or would work in the Delaware with prices above $70, not below $60. I have never been in the tight oil business as an operator, or CFO, so I don't know how to calculate IRR when revenue is negative. By year two the best super long laterals are not halfway to pay out on a full cycle basis.
I reserve the right to add to this and make edits as time goes by.
Next up we are going to take a look at 3 milers in the Permian as a whole, then in each sub-basin. There are some goodun's, particularly in Lea County!
DUC's are gone, its longer laterals that are holding the Permian Basin, and U.S. production, together. They are cheaper to drill per lateral foot, providing it is steered in zone and there isn't a lot of whole stability issues, which there are.
Three Mile Laterals in the Permian Basin
Again, here is the base-line chart for current well productivity in the Permian Basin from 2016 thru July 2025 with three points of interest and cumprods, for each point. These well profiles are normalized for lateral length.
Below is a cumulative oil vs. rate for all three-mile laterals drilled in the Permian Basin since 2020, roughly 5.6 years ago (60 months) with actual cumprods. plotted to month 60, all wells, all counties. There is of course no reason to normalize this chart for lateral length; these wells are all from 10,560 feet to 15,840 feet long.
Here we can see that three-mile laterals, much like fours, have significantly higher cumprods. at month 19 than all other wells in the Basin, combined, but their cumprods. at month 60 imply NO increase in EURs over the life of the well.
Like 4-milers the best 3-milers are in Lea and Eddy Counties of New Mexico.
There are many more three milers in the Permian than fours. It appears that could be a function of cost efficiency and de-risking drilling problems as threes perform almost the same as fours. Also, it takes less room for threes and room in the cores is getting very, very scarce.
Three Mile Laterals in the Mldland Basin
In the Midland Basin three-mile laterals have higher IPs and cumprods. at month 19 that other wells in the Basin. But by year 5.6 and maturity they're cumprods. are lower and therefore they're implied EURs are going to be lower by a significant amount. I interpret this to be entirely a function of how many total wells there are in the core counties (34,000, est.) and pressure depletion, or parent-child degradation (Novi).
I think these 3 milers in the Midland support the possibility there may only be 4 years, or less, of (marginally) profitable, Tier 1 and 2 locations left in the Midland with oil prices below $70. It's poopin' out and now, rather quickly, it seems to me. I don't fully understand why the tight oil sector does what it does, other than desperation, and wells being drilled in the Midland Basin don't work below $70. Remember, that is what Travis Stice, the former CEO of Diamondback, said.
Three Mile Laterals in the Delaware Basin
There are far fewer 3-mile laterals in the Delaware Basin and this is most likely due to Federal BLM leases, contiguous acreage issues and potash mines. I do not know how spacing regulations in New Mexico stack up with Texas but in the core of SW Lea and SE Eddy, there are a lot of 2-mile laterals stuffed in there already.
There could be a number of reasons for cumprods. at month 19 being lower than the Midland. Better reservoir management, pressure preservation and tougher flaring regulations that indirectly lease to the above. Once again, Lea and Eddy Counties lead the pack.
This basin is deeper and a little costlier to drill and complete in, but there are not very many drilling problems that require multiple casing strings. They pay absurd lease bonuses over in New Mexico to the FED's, $90-to over $100K per net acre. I am working on well costs.
Clearly these wells perform better over time, also likely related to better reservoir management. The corner area of Lea, Eddy, the State Line, Loving and northern Reeves are also home of the mighty Bone Springs. 60-month cumprods. in Lea County are pretty impressive for 3-milers, even though there are fewer 3-mile laterals in Lea than Eddy, for instance. There are just better wells in Lea County, period, because of the Bone Springs, one bench in particular has porosity values of over 24%.
The Float Shoe on Longer Laterals in the Permian Basin
Nobody makes enough money drilling HZ wells in the Permian Basin below $70 WTI NYMEX and whatever WaHa natgas postings are in a given day...NOBODY. They'll tell you they do because they leave out a lot of costs completely. At $58 WTI NYMEX it is insanity to be drilling any wells. But the sector is trapped like goats in a pen because of drilling commitments and debt. Shareholders are staying put, for now, because of dividends, but these public companies running the show in the Permian are having ro borrow money to pay those dividends. What does that tell you?
So, you lose less money if you are drilling 3 and 4-mile laterals and what money you do make, you make faster.
As I've said, the future of the Permian Basin now rests mostly on how much room there is left in Tier 1 and 2 core areas for three and four-mile laterals. As long as prices stay below $70 these longer laterals become even more critical.
Think about how many wells are still being drilled and completed in these core areas... only to lose money. That is NOT going to last much longer and then, "its gone" and America is back to being owned by OPEC.