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THE FLOAT SHOE
Associated Gas from the Permian and Maverick Basins as Viable, Affordable LNG Feedstock Is Highly Improbable.
Here's what Enverus Intelligence projects the American LNG industry will need in the way of natural gas over the coming years in different hubs in different locations along the Gulf Coast.
The Texas and Louisiana LNG industry is in the process of spending approximately $80 B to make these exports happen.
I'm speculating that most gas directed toward Louisiana will be from the Haynesville and ALL gas toward Texas will be associated gas from the Permian Basin tight oil play and the Eagle Ford dry gas leg including the big Chalk gas play in Webb County.
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Final Thoughts on Permian Associated Gas Potential
Today's Delaware Basin Wells
The Permian Basin HZ play added approximately 1.25 BCFGPD in 2025 (pending adjusted reporting) and as we've shown you, most all of that came from the Delaware Basin. It appears that associated gas, including "gas well" gas from tight oil wells with high GOR, declined in the Midland Basin in 2025.
A lot of wells drilled in the Delaware last year targeted gassier Bone Springs benches out west. There is room for longer, three-and four-mile laterals out there and for that portion of Delaware wells drilled in New Mexico, lower royalty burdens, from 3/16ths to 1/8th on Federal BLM lands, makes an economic difference. Below $60 WTI and WaHa gas postings, Delaware Basin wells are still not profitable (enough), but they lose less money at 1/8th royalty rates.
The Texas part of the Delaware has been declining for several years.
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Mike
Feb 04
Above is a Novi chart showing pretty clearly that the Texas portion of the Delaware Basin is in decline for both C+C and in 2025, even associated gas production, including Culberson and Western Reeves Counties in the high GOR gas leg.
There are over 14,000 HZ wells stuffed down in Texas, in five partial counties where GOR is skyrocketing, well productivity is falling on an EUR basis and produced water is flooding very limited injection points. The area around Toyah and Northern Loving County, near the Stateline rocks every day with earthquakes.
New Mexico, above, as we have previously pointed out, is still growing associated gas and gas well gas, though C+C is beginning to wane.
Over 700 more HZ wells were drilled in two counties of New Mexico part of the Delaware Basin than in seven total counties in the Texas Delaware in 2025. Wells are better, economics are better and the majority of produced water in New Mexico gets shoved down to Texas making OPEX cheaper.
In New Mexico, Lea County is over drilled and pretty much done; in the S.W. corner of Lea County, 6,740 HZ wells are crammed into every available square foot of space, in every bench, save pot ash set asides. EOG operates a third of those wells and as you've heard me say before, EOG guts every well they drill.
In spite of longer laterals, when normalized, or standardized for lateral lengths the past three years of initial well productivity in Lea County has declined significantly. EURs are falling. In my opinion there are few Tier 3 and 4 level drilling locations to drill in Lea County. Lea is now becoming like Midland County.
Below, Permian Basin C+C production AND associated gas production is now being carried entirely by one county, Eddy County in New Mexico. It got hammered with wells in 2025.
But Eddy County is beginning to also show signs of exhaustion. Look closely, upper right at Oil Rate Vs. Time and you will see, like Lea County next door, 2023, 2024 and 2025 well productivity per 10,000 feet of lateral is beginning to decline. The only component of tight oil production in New Mexico not beginning to decline is produced water and WOR.
If Eddy County has room to run, it's going to be in the far west, in the high GOR leg and even that is bound by the physical limits of the Basin itself. They have to figure out how to drill 30,000-foot laterals in the crumbly Bone Springs across potash set asides to advance the oil and gas abundance myth or the LNG department in the White House is going to have a cow.
Edited
The Complete Guide to Permian Basin Gas "Molecules"
As both sub-basins in the Permian begin their slow decent in crude and condensate production (C+C) the shift in focus turns to associated gas from tight oil wells and high initial GOR areas for "gas well" gas. The Permian needs to deliver approximately 13 more BCFGPD by 2032 to meet rising electricity needs associated with artificial intelligence data centers and to supply gas to $72 B of proposed LNG facilities along the Texas and Louisiana Gulf Coasts.
We've shown you clearly the past 14 months that well productivity (defined by estimated ultimate recoveries, or EURs) is declining now in both sub-basins, the Midland and the Delaware. Wells are not as good as they use to be, even drilling longer laterals. Again, good is not defined by upfront cash flow but by ultimate recovery. This is true for oil and associated gas.
Novi Labs in Austin suggests this declining well productivity…
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Mike
Feb 02
Most of my colleagues working in the Permian Basin and elsewhere do not believe three quarters of these power plants and AI data centers in West Texas will ever be built. Maybe this one will, maybe not.
We all basically share the same belief: the associated gas potential of the Permian to fuel these power plants that will in turn provide energy for AI data centers has been grossly over exaggerated.
I am hoping when we get finished analyzing the Delaware Basin, you'll agree. Remaining natural gas molecules from the Permian Basin will better serve Americans for electricity generation, to stay warm in the winter, cool in the summer and ultimately someday, as a transportation fuel.
When its 28 degrees and sleet is blowing horizontally, I much prefer natural gas to "data'" from artificial intelligence.
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Here is an old Novi chart for rig counts after the ban on U.S. crude oil exports was lifted in late 2015. Exports offered a new market, the tight oil sector borrowed a little south of $300 B, public and private and with no regard for pressure maintenance or pressure preservation, it went ape shit and put another 4.5 MM BO on the world market in 3 years, which then drove the price of oil back down to the low $50's. The money that was borrowed, then lost, on tight oil during this period was phenomenal
The exact same thing will happen with LNG and the new "market" it offers US tight oil producers looking to cash in on higher associated gas prices. More new debt will be stacked on old debt.