Capital discipline appeared to creep into the U.S. drilling permit count at the end of 2019, with slumping activity during December seen across the Lower 48, according to data compiled by Evercore ISI.
The monthly report on drilling permit activity uses data culled from federal and individual state numbers. Evercore said the reduction in activity from November was driven by a whopping 47% decline in Rockies activity.
Total onshore permitting fell by 27% month/month (m/m) to 2,324, mostly because of a pullback in the Powder River Basin (PRB), down by 54%, and in the Denver-Julesburg (DJ) Basin/Niobrara formation, where activity fell by 46%.
Reduced permitting in the PRB mainly was attributed to a deficit in activity by public operators, said analyst James West and his team. For example, EOG Resources Inc.’s permit requests in the PRB fell by 43% from November, while Devon Energy Corp.’s total was off by 23%.
"This was partially offset by stronger activity by private operators to 443," a 10% gain m/m, West said. The DJ/Niobrara contraction followed weaker activity by Occidental Petroleum Corp., whose 22 permit requests were 87% lower than in November, and by Ossidiana Operating LLC, whose permitting fell by 33% to 78.
Oil permits in the Gulf Coast region were relatively flat to November at 1,080, a 7% decline, "as activity remained firm" in the Eagle Ford Shale, with a 4% increase. The Eagle Ford gain was partially offset by an 8% decline in the Permian Basin m/m.
"On an annual basis, permits issued in oil formations totaled 46,522," a marginal 1% gain over 2018, boosted by the PRB, with a total increase of 29%, and from the Green River Basin, also up 29% year/year (y/y).
Oil permits retrenched from 2018 in the DJ/Niobrara, down by 54% y/y, the Mississippian Lime (minus 38%) and the Permian (minus 14%).
"Additionally, 2019 permit levels languished in the Midwest (minus 26% y/y) and other shale plays (minus 29% y/y)," West noted.
On the natural gas side, permitting in December fell m/m by 32% to 311, led by fewer applications from private companies working the Marcellus Shale, where permitting declined by 23%.
Natural gas permitting overall also declined in 2019 from 2018 by 15% to total 4,096, according to Evercore. The biggest shortfall was in the gassy Haynesville Shale, where requests by public operators was down 68% y/y. Utica Shale gas permitting, however, increased to 310, a 30% gain.
For injection wells, permitting activity remained healthy during 2019, according to West.
In Texas, home to more activity than anywhere in the country, injection permitting was relatively flat y/y at 734, off 7%, while service permits increased by 5% to 21.
Marcellus injection permitting rose 55% y/y to 231, "despite slower activity over the past three months," West noted.
Stronger injection well permit applications also were seen in the DJ/Niobrara, up 30% y/y to 13, and in the Piceance Basin, with 11 total permits, a gain of 160%.
In other news, the Railroad Commission of Texas (RRC) staff for the second year in a row set a record during 2019 by taking only two days on average to process standard drilling permits, one day below the state’s legislative requirement. Standard drilling permits do not require exceptions to RRC rules, which may be included for spacing or density.
During 2019, RRC said it processed a total of 11,654 new drilling permits, led unsurprisingly by the Permian.
"The Railroad Commission’s technological solutions enables operators to quickly apply for and receive drilling permits," said Executive Director Wei Wang. "Nearly 99% of operators apply for drilling permits online. This allows our staff to thoroughly and quickly review each application to ensure operators meet all drilling permit requirements."
Texas operators during 2019 led the country in oil production at 1.438 billion bbl. Natural gas output last year totaled 10 Tcf, RRC noted.