Lower 48 permitting for natural gas wells of late have confounded the bearish headlines, while activity in the oil plays has fallen, according to data compiled by Evercore ISI.
The monthly compilation using state and federal data indicated the July oil and gas permit count contracted from June by 13.7% to 4,630.
Natural gas permitting was “surprisingly healthy” in July, however, even with the sharp stock declines among the gassy exploration and production sector and with Henry Hub nearing $2.00/MMBtu, Evercore’s James West and his colleagues noted.
Gas permitting climbed to 340 in July, up 8.3% month/month.
The Marcellus Shale was the primary beneficiary for the uptick in unconventional gas permits, up 20 from June to 117. Overall permits in the Marcellus rose to 161, a gain of 44 month/month, while the Utica Shale dipped to 29, down by one.
The Haynesville Shale fell by 18 in July month/month to 150, but permit applications for unconventional gas alone accelerated by 26%, West noted.
On a year-to-date basis through July, domestic gas permitting overall is down by 12% year/year, primarily because of overall lower activity in the Haynesville.
During July, there also were fewer permits issued from June for the Denver-Julesburg (DJ) Basin/Niobrara, down 678, the Eagle Ford Shale, off 72, and in the Mississippian Lime, with 31 fewer permits requested.
Weakness in the DJ/Niobrara led to fewer permit applications month/month for unconventional oil wells, down 13%, while the Eagle Ford was impacted by a 9% reduction in permits for unconventional oil and natural gas wells, Evercore’s team noted.
Through July, onshore permitting overall was up by 18 year/year at 36,806 because of a higher count in the Bakken Shale, up 13% year/year, and in the DJ/Niobrara, which has reported a 65% gain since the start of the year.
The Permian Basin permit count through July was 6,178, off 8% year/year. The Permian represented 17% of total permits filed through June, with the DJ/Niobrara representing 58% and the Bakken at 5%.
Injection well permitting in the Permian also is strengthening, Evercore noted. These wells are constructed to inject fluids that either maintain or ramp pressure in an oilfield to optimize recovery.
Even with the July contraction in the Texas permit count, which was off 5% from June, injection and water supply well permits climbed by 31%. Injection well permitting during April fell to 49, a 51% dip since January.
However, injection well permitting then steadily increased for three months in a row by an average of 21%/month. The gains mainly were driven by the Permian, which reported permitting reached 84 in July, up by 20 from June.
“The Permian accounted for 98% of permit applications for injection wells in Texas, while the remaining 2% occurred in the Haynesville,” according to Evercore.
In its early read on August permitting, Evercore reported onshore requests at 1,122, up 19% week/week for the first week of the month.
However, permit activity had softened early this month in the Permian to 179, off 44 from the final week of July, as well as in the Eagle Ford Shale at 59, down 22. Also off was the Bakken at 22, a decline of nine.
There was an early August rebound in the DJ/Niobrara, with 193 more permits requested than in the final week of July.
“Conversely, gassy formations ramped to 104,” up by 50 for the first week of August, driven by the Marcellus, which gained by 43, Evercore noted. There also was an uptick in the Haynesville, up by five from the final week of July, and in the Utica, which gained two.
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