Barclays (NYSE: BCS) recently reported that, despite OPEC cuts and increasing shale production, the Permian is the only basin in the U.S. that's expected to increase production this year.
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This podcast was recorded on Feb. 10, 2017.
Sean O'Reilly: We have to talk about the increasing oil production in the Permian Basin, mostly because it's a day that's ending in "Y." I guess things are getting a little crowded down there, Taylor?
Taylor Muckerman: Yeah. We've talked about the Permian quite a bit. Barclays came out recently and said that they think it's the only basin in the U.S. that's going to increase production this year.
O'Reilly: Everybody is talking about how OPEC cut, so shale is going to come back. I thought there was going to be a little bit more up there. I'm surprised.
Muckerman: Yeah. You kook at about 30% increase in the rigs in the Permian. You'll see rigs being increased on other sites as well, like the Bakken and the Eagle Ford. But they're not so sure that overall production is going to increase anywhere else other than the Permian.
O'Reilly: Interesting. I'm an investor; give me a 10-second takeaway that I can use with this thing.
Muckerman: I mean, it's the hottest play. If you listen to all the news, you have ExxonMobil (NYSE: XOM) spending a couple billion dollars there --
O'Reilly: I think it was $6.5 billion. It was a lot. [laughs]
Muckerman: I think they bought 250,000, somewhere around there, acres in the Permian.
O'Reilly: Yeah, and they bought that from the Bass family. I'm pretty sure about the $6.5 billion.
Muckerman: It sounds right.
O'Reilly: Because both of our jaws dropped.
Muckerman: Right. The Bass family is doing all right. Then, you have Noble Energy, also bought some pretty significant acreage in the Permian. These aren't small players. Exxon, obviously, the biggest publicly traded energy company in the world, although Saudi Aramco wants that title, maybe in the next couple years. But because they're going to be producing more, and because we lifted the oil export ban -- for those of you who might not know that, back in late 2015, there was some takeaway and storage capacity issues. So maybe if you want to play the Permian Basin, producers aren't the only way. You have some midstream companies grappling to try and build pipelines in storage tanks.
O'Reilly: That article you sent me mentioned [Magellan Midstream Partners].
Muckerman: Yeah, and then you have Enterprise Products Partners as well. They're just lacking in the storage and transportation area. A lot of this oil is going to get exported; at least that's what they believe. So you have some companies that need to build out capacity, and that could lead to great revenues and maybe a higher dividend for some of these companies.