In World's Hottest Oil Patch, Jitters Mount That a Bust Is Near
http://www.rigzone.com/news/oil_gas/a/151847/In_Worlds_Hottest_Oil_Patch_Jitters_Mount_That_a_Bust_Is_NearSeptember 25, 2017
...The telltale signs are the same as always, with companies like his desperate for skilled workers to man the drilling rigs that pierce the horizon in west Texas. What’s unusual, and unnerving, is that the Permian is still thrumming with activity after prices cratered for the stuff it pumps out. Crude is trading for around $50 a barrel, but this is the hottest oil patch anywhere on Earth, a swing producer influencing the trajectory of global markets and threatening OPEC.
That either means the industry has become so incredibly efficient that production can continue to rise even if prices don’t, or that it’s throwing money after a mirage. Pruett, chief executive officer of Midland, Texas-based Elevation Resources LLC, is more and more concerned about the latter.
“Oil men are innately optimistic,” he said, “and sometimes our optimism is our own worst enemy.”
This is the funny thing about the business. Ups and downs are so ingrained that crazy success is seen as an omen that the end may be around the corner. It has often been the case. Midland, a city of about 140,000 halfway between Fort Worth and El Paso, has ridden the roller coaster since oil was discovered in the Permian in 1923. Now the place is on a major upswing that’s permeated every sector, from auto sales to hotel bookings to home construction.
“You would think oil is $100 a barrel the way the real estate market is going,” said Victoria Printz, a Midland-based agent representing properties selling for more than $1 million. The average new-home sales price in the metro area shot up 8.5 percent in the past year, and permits for new construction climbed 76 percent. “This is extraordinary—even for Midland.”
What gives oil people pause is that costs for everything from pressure pumps to well casing have been been rising, up from 20 to 30 percent in the last year, a marker of an overheated situation that could burn out. Another is that possibly too-eager drillers are starting to venture from prime acreage to less bountiful formations, where they may get less bang for their bucks....
