With the latest oil and gas drilling boom in full swing in the Permian and Midcontinent, I think the dynamics resemble a traditional wave pattern, with the E&Ps riding the leading wave and both midstream and service companies catch the second wave. The trough between the waves represents the delay between the ramp up in drilling and the build out of supporting infrastructure which has caused capacity constraints, an increase in drilled/uncompleted wells and widening oil and gas price differentials between market zones (Gulf Coast and Cushing) and the supply zones of West Texas and Western Oklahoma. With water management and recycling becoming increasingly important to manage the pace of drilling, many E&Ps including Pioneer, Diamondback, Newfield, Cimarex, and Roan have built water handling infrastructure to control their drilling schedule and minimize any “trough delays” that would have traditionally been part of the midstream contract and construct process between the first and second wave. Where else have you seen “trough delays” eliminated ?
Comments