Key Permian Basin Oil Producers Can Now Move More Water Per Day Than Midland or Odessa

Gabriel Collins, “Key Permian Basin Oil Producers Can Now Move More Water Per Day Than Midland or Odessa,” Texas Water Intelligence™, Water Note #7, 15 February 2018

The water infrastructure footprint in key parts of the Permian Basin is becoming both physically massive and geographically expansive. This helps create commercial critical mass and facilitates making water a marketable commodity. This snowballing is also how the smaller and midsize operators can potentially be tied into the networks the heavyweights are now building.

Some operators are now handling as much–or more–water each day than large regional cities. Consider the following: at year end 2016, Pioneer Natural Resources reported that it was sourcing an average of 350 thousand bbl of water per day for fracs.^[i] That volume is almost 20% larger than the average daily potable water consumption of the entire City of Midland during FY2016.^[ii] If one adds Midland’s total water sourcing and sewage treatment flows together, the total for FY2016 is about 523 thousand bpd.^[iii] Depending on which publicly reported numbers you rely on, Pioneer is building out its system to handle from twice, to as much as 4 times that volume, by the mid-2020s.^[iv] Likewise, Anadarko is building a water disposal system in the Northern Delaware Basin that it states will have 700 thousand bpd of capacity–a daily flow rate 34% larger than Midland’s combined municipal water flows in FY2016.^[v]

These numbers are big, but they only capture a fraction of the potential market and much more meat remains on the bones–a reality that likely energizes this crowd here today.

^[i] Pioneer Natural Resources 4Q2016 Earnings Call Transcript, Statement by CEO Tim Dove, 8 February 2017, https://seekingalpha.com/article/4043988-pioneer-natural-resources-pxd-ceo-tim-dove-q4-2016-results-earnings-call-transcript?part=single

^[ii] Midland Texas FY2016 Comprehensive Annual Financial Report, https://www.midlandtexas.gov/ArchiveCenter/ViewFile/Item/203

^[iii] Ibid.

^[iv] For 1 million bpd system figure, see statement of PXD CEO Tim Dove on 8 February 2017 during the company’s 4Q2016 earnings call. For the 2 million bpd figure, see Brandy Fidler, “Nothing But Water,” Midstream Business, Jan/Feb. 2017, https://www.h2omidstream.com/press-releases  (Discussing background of H2O Midstream EVP and Chief Development Officer Stephen McNair). See also Mr. McNair’s official H2O Midstream bio, available at https://www.h2omidstream.com/management-team#openModal3 (archive copy available upon request)

^[v] Anadarko Investor Presentation at Bank of America Merrill Lynch 2017 Global Energy Conference, 16 November 2017. http://investors.anadarko.com/events