Permian Producers Report Scope of Winter Storm Shut-Ins
After making it through the largest weather-induced shutdown ever to strike the region, operators in the prolific shale basin are sharing new numbers on how much production they were forced to curtail.
Oil and gas producers in the Permian Basin are revealing the extent of their losses from a historic winter storm that caused widespread power outages and wellhead freeze-offs across much of Texas and in other parts of the southern US last week.
The figures come as companies begin to issue their fourth-quarter earnings and capital plans for the rest of the year.
Analysts are struggling to pin down the exact toll of the storm on US oil production but suggest that between 2 and 4 million B/D were curtailed by the biggest weather-induced disruption to Permian oil fields. Texas accounts for about 40% of US crude production.
Occidental Petroleum, the Permian’s second-largest oil producer, informed investors this week that about 25,000 BOE/D of production was shut in during the winter storm. After accounting for the lost production, the operator expects first quarter output in the Permian to be between 450,000 and 460,000 BOE/D.
Pioneer Natural Resources lowered its first-quarter production forecast by about 30,000 B/D and added, that as a result, its new target is between 259,000 and 274,000 B/D.
Diamondback Energy said up to 5 days’ worth of production was wiped away during the storm, which based on January’s output, could total more than 870,000 bbl of deferred production.
“While the impact of the recent winter storms in the Permian Basin will be significant for first-quarter production, we expect to overcome this adversity for the full year 2021, and I am proud of how our field organization responded to this challenge,” Travis Stice, CEO of Diamondback, said in a statement.
Cimarex Energy said the winter storm’s impact on its operations in Texas and Oklahoma lowered its first-quarter output estimate by 5–7%. The mid-sized operator is now aiming to pump between 65,000 and 69,000 B/D for the quarter.
Also citing the freezing weather and severe icing, Laredo Petroleum said it faced major challenges with operating its Permian fields for at least 12 consecutive days. As a result, the company lowered its first-quarter production estimate by 3,000 B/D.
Laredo highlighted in its operations report that it faced a lack of field gas, electricity, and takeaway and processing capacity. For the nearly 2-week period, Laredo could not access some of its wellsites and added that its vapor recovery units, required for environmental regulations, were rendered inoperable by the extreme weather.
Other operators are expected to report similar disruptions in forthcoming financial filings.
While the operators work to get the rest of their wells back on stream, analysts are working the numbers to figure out just how much oil and gas output was curtailed earlier this month.
Total Permian production may have dropped as low as 1 million B/D before returning to around 4.3 million B/D on Monday vs. a pre-storm output of about 4.5 million B/D. This is according to figures from RBN Energy, which also said Permian gas volumes bottomed out at around 3 Bcf/D before bouncing back to more than 10.3 Bcf/D.
Other figures from S&P Global suggest that about 3.4 million B/D of previously shut-in crude is flowing again with 600,000 B/D still offline in the Permian.
It could take as long as 2 weeks for the Permian to see a full restoration of baseline production, according to a Reuters report citing industry executives and analysts. Reuters noted that crude prices are at 1-year highs after the winter storm which was responsible for taking 2–4% of global supply off the market.
By Tuesday afternoon, West Texas Intermediate future contracts were up slightly from the start of the session at $61.73/bbl. Brent crude was also up slightly to $65.47/bbl.