Analysis: Does The US Permian Basin Have A Real Future?

These latest updates on energy production investments from Areas & Producers ought to answer that question.

My focus on the Permian Basin is part of a larger interest in the future trends related to North America industrials. The industrials are really making a comeback in this region, particularly mining in Canada and construction in the United States. But it’s also become clear to me that energy production investment across the board are playing the biggest role in both the United States and Canada during this industrial push. And that’s where we dive into the Permian Basin as an important fact of the United States (and Canada’s?) future industrial policies.

Read these three latest updates on the Permian from Areas & Producers about TRP Energy, ConocoPhilipps and the Patterson-UTI-NexTier Oilfield Services merger. To know more about how the Permian Basin is driving activity in global markets, follow the publication Areas & Producers.

TRP Energy Serves as a Another Indicator of Permian Basin Production Growth

There isn’t a lot of talk about this development in the Permian Basin right now. But I think it’s another indicator of how much production growth is being concentrated in the United States’ key energy producing areas of New Mexico and Texas.

The news is that TRP Energy, a Houston, Texas-based oil and gas producer in the Permian, is seeking to sell off its oil and gas operations of which have been reported to be worth $1.5 billion.

There’s been a lot of buzz about mergers and acquisition (M&A) deals in the US Permian this year, along with what appears to be a revival in the smaller energy producers there. An OilPrice.com article goes over all of the main details of how the big and small producers are playing this trend.

TRP Energy is backed by Greenbelt Capital Partners, an investment bank specializing in energy production investments in the Permian Basin and North America markets. I highlight this aspect because one of the less transparent findings of these companies operating in the Permian are the key financing entities of these energy production investments.

For instance, Greenbelt Capital Partners is an offshoot of Trilantic North America, who formed a new oil and gas partnership committing $250 million in equity to invest in TRP Energy. It will be interesting to see how the financing plays out in the Permian Basin as it gets more competitive among smaller energy producers.

US Permian Basin Just Got A Lot More Attractive in New Mexico

According to a story written in OilPrice.com the oil and gas production in the US Permian Basin has seen New Mexico account for 50% of crude oil output increases.

Publishing all of the latest data on crude oil output in the United States, the report’s findings are: “New Mexico’s oil production growth eclipsed the growth of crude output in any other U.S. state, including Texas, the biggest U.S. oil-producing state and also home to part of the Permian shale basin.” Oilprice.com

There’s been a renewed focus on oil and gas production in the United States and Canada. Although the Permian Basin is where the shale gas story originated, and where ExxonMobil and Chevron continue to put forth lots of its capital and investments, there are other plays happening around North America crude oil production to pay attention to going forward.

It was announced that Houston, Texas-based oil and gas producer, ConocoPhillips, has exercised its right to acquire the Surmont oilsands field project for approximately $3.33 billion. The company was allowed to fully takeover th crude oil site after acquiring French TotalEnergies’ 50% stake.

This development follows a long line of shareholder-return scenarios by which oil and gas majors are using their profits to increase value to their shareholders. Financial Post

While the Permian basin contiues to be the company’s primary focus, it’s not difficult to explain why they are increasing their stake in oil and gas operations in Alberta, Canada. ConocoPhillips drills in Alaska, which is a domestic political flashpoint in the United States, whereby the Biden Administration has controversially approved the company’s Willow project to begin production.

Aside from Alberta and Alaska, ConocoPhillips got in on the mergers and acquisitions (M&A) game early in 2020 and 2021 when the company bought Concho Resources and Shell’s Permian assets respectively. This could give the company an advantage over other oil and gas producers in the Permian basin, as long as such legal disputes as the Willow project do not consume most of their financial resources.

Patterson-UTI & NexTier Oilfield Merger To Revive Oil Exploration & Production in US

With so much happening in oil and gas recently you might have missed this recent news about two United States-based oil and gas companies: Patterson UTI Enegy and NexTier Oifield Solutions merged in a $5.4 billion deal.

This merger brings together two of the lesser known oilfield services companies. Patterson UTI Energy specializes land drilling while NexTier is reputable for its well completion operations. The deal is expected to finalize by the end of 2023. Reuters

This merger reveals that oil and gas drilling activity in the United States is likely to pick up over the next few years, at least, until the prices of oil and gas become less volatile or demand stops growing.

When this merger finalizes, it will be a major force in the oil and gas sector of the United States, as most of the supermajors are focusing on offshore markets in developing countries.

Berkshire Hathaway has once again increased its stake in the Permian Basin oil and gas producer Occidental Petroleum (OXY).

This brings their overall investment stake in the company to 24.4%.

Warren Buffet’s company has increased shares in OXY since the company acquired Anadarko Petroleum Corporation in 2019.

This is a big story in stock market and financial news, as it revealed a much bigger focus on energy equities and an overall bullish environment for capital investments in the energy sector, especially in oil. However, it must be taken into consideration how much of an impact China and India will have on global oil markets. They are the biggest importers of Russian oil. But they are also competing for global industrial production capital and foreign direct investments (FDI) vis-a-vis one another.

That’s why the increased attention put on the United States’ oil and gas production markets are only one part of the story: it is not necessarily the driving factor for global energy markets. This is evident in the decision of OPEC+ to decrease their oil production output in spite of competition from US oil and gas production.

To know more about what’s happening with OPEC+ oil cuts and global markets, read this full story in Areas & Producers:

Saudi Arabia & Russia Aren’t Fooling Around With OPEC+ Oil Cuts