Permits for new oil and gas wells rose 25% month/month in July, with “significant” growth in the Permian Basin, but overall activity was down by two-thirds from a year ago, according to Evercore ISI.

Onshore Drilling Permits

The analyst team led by James West each month compiles federal and state permitting data, which provides a window into what future U.S. oil and gas activity may look like. 

The July numbers indicated that “activity is back on the menu,” but the Lower 48 is “very much still on a diet,” as permitting was off 66% from July 2019, West said.

The most active area was the Permian, where growth was driven by mid-cap exploration and production companies, which requested 52% more permits than in June. 

“Operator permitting activity increased to 1,545 wells in July,” up 25% month/month. Most of the applications were submitted in the Permian, up 19%, while other plays climbed 18%. 

The Railroad Commission of Texas (RRC) reported 1,354 oil permits were issued in July, 24% higher than in June. The commission also approved 395 wells, about 37% higher month/month, with most of the wells slated for the West Texas portion of the Permian.

New Mexico, which shares the Permian, granted 189 permits last month, about 21% higher than in June. Devon Energy Corp. alone ramped activity to 81, which was 102% higher month/month, according to Evercore. Devon and EOG Resources Inc. accounted for 56% of the New Mexico applications.

The Bakken Shale permit count also improved in July by 12% from June to 75, driven by ExxonMobil and ConocoPhillips activity. ExxonMobil won approval for 16 Bakken wells, which was 15 more than in June and its highest count in the play to date this year, Evercore noted.

Even on the stronger month, permitted oil wells through July declined to 11,287, off 67% from the first seven months of 2019. Permian operators alone had reduced their permit applications to 4,071, off 34%.

Healthier Gas Outlook

Meanwhile, natural gas permitting “suggests a healthier outlook,” mainly in the Marcellus Shale, which was up by 73% from June. Evercore said U.S. authorities granted 191 gas permits total, up 35% month/month, “reaching the highest monthly levels since March.” 

Marcellus permitting hit 64 in July, and there were “intensified permit applications” in the gassy Haynesville Shale, up 12%, “where activity has increased steadily for the last two months.” 

The resilience in the Haynesville was attributed to four additional wells in northern Louisiana by Comstock Resources Inc. There also were three permits issued in the East Texas portion of the Haynesville to Osaka Gas Co. Ltd.’s Sabine Oil & Gas unit.

In addition, Utica Shale drilling permits climbed to 28, 75% more than in June, driven by Ascent Resources Utica Holdings LLC, which claimed 69% of the applications, according to Evercore.

“The gas permit count is standing at 1,319 year-to-date,” off by 48% from the same period of 2019.

Meanwhile, Texas plug and abandonment (P&A) permits continued to rise, driven by the Permian, with 1,135 wells, up 20% from June. P&A wells in the Lone Star State were up 45% for the year through analysts noted.

The RRC also permitted 11 injection wells in the Permian last month, down by 39% from June. In the Bakken, 36 wells received P&A approval, versus 13 in June.