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Chart To Make Your Hair Stand Up

This is the Energy Information Agency's estimate for HZ tight oil production for September 2021 showing a gain of 49,000 BOPD; most of that gain I believe is from completing + 12 month year old DUC's.

What folks should focus on is the production decline in September of 243,000 BOPD. That's how much production the Permian looses per day and that has been fairly consistent over the past four months at current rig counts.

Because of the steep decline of unconventional tight oil, something in the order of 84% the first 32 months of production life, there is essentially a one to one relationship between proven developed producing (PDP) reserves replaced, and production levels. Not quite, but you get the point. At $65 oil and $3 gas, gross, 65-70% of total, typical EUR in the Permian is required just to payback well costs...and interest on long term, legacy debt.

Reserve replacement ratios are the single most important metric to use in determining the future of tight oil in the Permian, and the US. If its not coming in the front door as fast as its going out the back, its a problem.

DUC's are all but done, GOR is going up. WOR is going up, over drilling is causing pressure depletion in core areas and well productivity is going down every so slightly every year. And make no mistake, these guys in the Permian are running out of primo locations; they will soon start to have to move into flank areas where well productivity is going to be even less, costs higher, and economics worse.

Last but least...3.0-3.5MM BOPD of tight oil is being exported to foreign countries from the U.S. and most of that comes from the Permian Basin.

Don't be fooled by the rhetoric, U.S. tight oil is speeding to a red light and when it drills itself all to hell and back, our nation is in a nine line bind. We're going to wish we hadn't exported all that oil, burned off all that gas and OPEC will own us once again.


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