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Chevron: Bright Spot In Permian

Summary

The Permian Basin is set to produce more oil & gas over the next 100 years than it has in the past 100.

Chevron Corporation has a 2 million net acre position in the Permian, 1.5 million net acres in the Midland and Delaware basins, housing 9 billion BOE in resource potential.

While the company has run into tons of problems at its major developments the Permian has been a bright spot for the firm, with output set to triple through 2020.

Back in 2011, Chevron Corporation was happy to report it had pulled its five billionth barrel of oil out of the Permian.

The Permian Basin has asserted itself as the largest and arguably most economical oil & gas plays around, especially considering the sheer size of the play. Located in West Texas and Southeastern New Mexico, unconventional drilling activities have breathed new life into a play once thought to be on the perpetual decline.

It is one of America's oldest hydrocarbon producing regions on a commercial scale, with production dating back to the 1920's. To be fair this came significantly later than the Drake well, which many consider to be the first intentional well for oil production, that was drilled in Pennsylvania way back in 1859.

A well drilled in Mitchell County, Texas, back in 1920 pumped out just ten barrels of crude a day when it was brought online in February. That well was tapping crude reserves just 450 feet below the surface and was named after a leasing agent for Texas and Pacific land trust, W.H Abrams. When the well was shot with nitroglycerin a few months later a couple thousand people gathered around to see.

It wasn't until the Santa Rita well, which was spud a year later, that the industry got an idea of just how lucrative and massive the Permian Basin could be. On May 28, 1923, five days after first-oil, an explosion could be heard for miles around as oil & gas roared out of the ground. The Santa Rita well brought the Big Lake oilfield online once equipment arrived to handle the blowout, marking the true beginning of the Permian's storied history as a major oil & gas play.

Since then the Permian Basin has pumped out 29 billion barrels of crude and 75 trillion cubic feet of natural gas. Once considered at the end of the line, the rise of horizontal drilling and hydraulic fracturing brought the region back to life. Through unconventional drilling and completion methods, entities such as the Railroad Commission of Texas and Pioneer Natural Resources (NYSE:PXD) see the Permian pumping out more hydrocarbons than it has over the past 100 hundreds in the next hundred.

Below is a look at Permian perma-bull Pioneer Natural Resources' expectations for the play, aided by data from respected third-parties. To be fair, take this guidance with a huge dose of salt. A lot of that recoverable resource potential isn't nearly as economical as what will be produced in the core of the play, but it paints a picture of...


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