America’s Best Oil Field Is Thriving Despite Low Crude Prices

Although cheap oil has forced frackers to shut down drilling rigs across large swaths of the U.S. shale patch, from the Bakken fields of North Dakota to the Eagle Ford in South Texas, there’s one region where the profits are still flowing. The Permian Basin, a 75,000-square-mile patch of scrubby desert stretching across West Texas and into New Mexico, has emerged as the most resilient oil field in America. Overall crude production in the U.S. is down by about a million barrels a day over the past 12 months, but output from the Permian continues to grow. All signs indicate that the Permian will stay in the money in 2017, as drillers and investors flock to the region.

Even with oil prices below $50 a barrel, frackers have been able to turn a profit drilling into the Permian’s dense layers of oil-soaked rocks. That’s because the underground geology makes it less costly to extract oil and gas there than in other shale patches. Drillers have added 67 rigs in the region since May, bringing the total in September to more than 200. Wells in the Permian are producing more oil at faster rates, enticing billions of dollars of fresh investment. Permian-related oil and natural gas companies have raised $9 billion in new equity this year. Explorers including Anadarko Petroleum, Pioneer Natural Resources, and EOG Resources have spent $14 billion buying up some of the most productive sites. The best land has gone for as much as $60,000 an acre, according to data compiled by Bloomberg. “Available capital has been magnetically pulled to the best economics, and the Permian has led the way,” says Robert Santangelo, Americas head of equity capital markets for Credit Suisse.