The second quarter of 2022 revealed that oil and gas production in the Permian Basin has exhibited no signs of slowing down production. Nearly half of all oil investments conducted between April and June came from the Permian. The Permian Basin is in West Texas and the adjoining area of southeastern New Mexico. It covers an area of approximately 250 miles wild and 300 miles long consisting of more than 7,000 oilfields. According to the Federal Reserve Bank of Dallas, the Permian Basin is responsible for nearly 40 percent of all oil production and 15 percent of natural gas production in the United States.
This region was awarded $5.5 billion out of a possible $12 billion in oil and gas merger and acquisition deals during the second quarter as the United States continues to strengthen its energy security. As stated by Andrew Dittmar, Director at Enverus Intelligence Research, “As anticipated, the spike in commodity prices that followed Russia’s invasion of Ukraine temporarily stalled mergers and acquisitions as buyers and sellers disagreed on the value of assets.” He went on to add, “High prices, though, also encouraged a rush by private equity firms to test the waters for mergers and acquisitions.” One of these mergers occurred in May between Texas-based Colgate Energy and Denver-based Centennial Resource Development. This merger led to the largest exploration and production company in the Delaware Basin of the Permian with the company anticipating production to be at 135,000 barrels per day.
While there is significant optimism on the future of the Permian thanks to its abundance of resources and high levels of investment from oil majors and private equity firms, the oil market has been extremely unpredictable for the past several years. It wasn’t that long ago that oil was trading negative at the early onsets on the global pandemic.