Permian Basin's Growth Hinges on Consolidation and Technological Advancements

The Permian Basin is considered a premier oil supply in the world and has enough inventory to sustain 16 years of drilling at the current pace, or the pace that has been seen over the past few years.

This is based on wells with a sub $55 per barrel break even point on an NPV20 basis, which is considered very commercial. However, this is not the same Permian Basin as it was five to 10 years ago, when there were many wildcatters and actively drilling companies involved.

The current inventory has been consolidated among a few large operators, with Exxon Mobil, ConocoPhillips, Diamondback, Devon, and Occidental holding about half of the remaining inventory in the Permian Basin. In the Midland Basin, these five companies hold over half of the premium inventory.

The Permian Basin's gas production is also expected to continue growing, with a base case calling for 36 or 37 billion cubic feet per day from the Permian, peaking in the 2030s. This could potentially reach as high as the low 40s. The increased gas production will help keep a lid on Henry Hub prices, which are important for industries such as data centers, power generation, and LNG.