DEPARTMENTS • OIL & GAS MARKETS
Oil and gas M&A’s increased by 16% in 2021, with highest values in upstream sector
A total of 74 billion-dollar deals were
undertaken in the oil and gas industry
last year, compared with only 40 in 2020,
according to GlobalData. The recovery in
oil price likely encouraged companies to
undertake more high-value deals to push
forward their growth plans. In fact, the
largest deal in terms of value for 2021 was
announced toward the end of the year,
when prices were at multi-year highs .
Global mergers and acquisitions (M&A)
activity in the oil and gas industry grew
annually by 16% to reach $335 billion in
2021, considering M&As with known deal
Permian basin new well productivity and lateral lengths
BOED 11,000
1,100 1,000
900 Average new well productivity
10,000 Average perforated lateral length (RHS)
9,000 800
8,000 700
7,000 600
6,000 500
5,000 400
4,000 300
3,000 200
2,000 100
1,000 0
2010 2011
2012 2013
2014 2015
2016 2017
2018 2019
2020 2021
2022 E
0 Source: Rystad Energy ShaleWellCube, Rystad Energy research and analysis
Average productivity of new wells in the Permian has climbed steadily since 2010
and is closely aligned with the rise in average perforated lateral length.
Rystad Energy: Permian is ‘entering a 3-mile lateral era’
The average productivity of new wells
in the Permian Basin is set to hit a record
high in 2022, exceeding 1,000 bbl/day of oil
equivalent (BOED) due to a surge in lateral
well length, Rystad Energy research indi-
cates. New wells are expected to break the
1,000 BOED threshold in 2022 for the first
time on record, rising from the 974 BOED
achieved in 2021. Average daily production
levels have steadily climbed since 2010,
aligned with the horizontal well length,
which is expected to reach 9,500 ft in 2022.
The total completed lateral footage of
wells in the Permian is expected to reach
a record high of 50 million ft in 2022,
beating 2021’s total of 45.8 million ft and
pre-COVID-19 levels of 47.5 million ft seen
in 2019. In 2020, total lateral footage in the
basin dropped due to the pandemic , clock-
ing in at only 32.5 million ft .
Operators only started using ultra-long
wells, of up to 3 miles in length, in the
Permian in 2014, but their popularity has
quickly grown. Their market share has
rocketed from 4% of completions in 2017
12 to 18% in 2021. However, considering total
completed lateral footage in 2021, these
wells accounted for as much as 23% of
completions. The average horizontal well length in
the Permian increased to 9,300 ft in 2021,
up from 9,000 in 2020 . This increase sig-
nals a growing trend among operators to
favor longer wells as they seek to increase
productivity. “The Permian is now entering a 3-mile
lateral era,” said Artem Abramov, Head of
Shale Research at Rystad Energy. ”Such
long wells were viewed as inferior for
their high finding and development costs
in some deeper zones just a few years ago,
but modern equipment and completion
methods allow extended-reach wells to
spread across the entire basin .”
However, it may be too early to view the
increase in ultra-long laterals as an indus-
trywide trend in the Permian, as some key
operators contribute to this segment with
a disproportionally large weightage rela-
tive to their total number of completions.
value. However, in terms of deal volume,
M&A activity was largely flat at around
1,800 oil and gas deals in 2021.
The upstream sector contributed to the
highest M&A transaction value of $120
billion in 2021. It also recorded the high-
est growth of 48% compared with 2020.
Westwood: Nearly 47,000
onshore wells to be drilled
around the world this year
A new report by Westwood Global
Energy Group is forecasting that
approximately 46,700 onshore wells
will be drilled globally in 2022, utilizing
3,960 active rigs per day. While those
numbers are about 20% higher than
what was seen in 2020, it’s unlikely
onshore drilling activity will return to
levels that used to be seen when oil
prices were above $100 – unless there is
a long-term return to such levels.
In the US, Westwood expects 13,000
wells to be drilled this year, with an
average of 650 rigs. In 2023, 15,000 wells
are expected to be drilled with 751 rigs.
Independents, which account for more
than 50% of shale production, are still
wary of ramping activity up to where
it used to be and pushing oil prices to
unsustainable levels, the report noted.
In OPEC+ countries, because the pan-
demic-related decline in onshore drill-
ing activity had been more muted com-
pared with other regions, growth will
be less pronounced, as well. Overall,
Westwood expects OPEC+ members to
drill 23,000 wells in 2022-2023. Due to
the long-term nature of the infrastruc-
tural development plans ongoing in
these countries, a strong ramp-up in
drilling activity is not expected until
late in the 2020s .
In other parts of the world, Westwood
pointed to China and India as countries
where high oil prices and a heavy reli-
ance on crude oil imports will provide
incentive to increase domestic produc-
tion. Argentina is also likely to see a
major activity boost. In January, the
country’s shale oil production totaled
224,000 bbl/day and accounted for
nearly 40% of total production, which is
a 61% jump from the previous year.
M A R C H/A P R I L 202 2 • D R I L L I N G C O N T R AC T O R
OIL & GAS MARKETS • DEPARTMENTS
Texas Petro Index: Strong crude prices drive recovery of state’s E&P economy
BY STEPHEN WHITFIELD, ASSOCIATE
EDITOR After nearly two years of contraction,
Texas’ E&P economy finally saw a year of
recovery in 2021, driven primarily by the
upward trend in crude oil prices, according
to the Texas Alliance of Energy Producers’
Texas Petro Index (TPI).
“We’ve begun to recover with the oil
price as demand has begun to recover and
as we’ve taken a considerable amount of
supply offline, certainly in Texas,” Karr
Ingham, Petroleum Economist at the Texas
Alliance of Energy Producers, said on 26
January. “We find ourselves in recent
months with prices averaging in excess
of $70, and now we’re seeing prices going
over $80. We’ve had quite an uptick in
price this year.”
The TPI, a monthly measure of growth
rates and cycles in the Texas upstream
oil and gas economy, has seen continu-
ous growth since March 2021. From 138.3
that month, the index had risen to 172.6
by December, a nearly 25% increase. The
December 2021 index, the most recent fig-
ure available as of February 2022, also
represented a nearly 29% improvement
over December 2020 levels. However,
the December TPI still remains around
19% lower than the most recent cyclical
peak (post-2015, pre-COVID) of 213.6 set in
February 2019.
The TPI is calculated by assigning val-
ues to a group of E&P indicators, including
crude oil and natural gas wellhead prices,
rig count, drilling permits, well comple-
tions, Texas crude oil and natural gas pro-
duction and employment figures.
As a main driver of the TPI, average WTI
prices rose by nearly 40% in 2021: up from
$35 in 2020 to nearly $50/bbl last year.
Monthly average WTI peaked at $77.12 in
October 2021, although average prices have
since risen even higher .
Natural gas prices – which represents
a combination of Waha and HSC prices –
averaged $5.79/MMBtu in 2021, the high-
est annual average since 2008 and a 251%
increase over the $1.65 average in 2020.
Winter Storm Uri was an obvious factor
in 2021, with both Waha and HSC seeing
significant spikes that February. In fact,
TPI scor
sc or
oree 250.00
250. 200.00
200. 213.1
193.1 185.7
172.6 150.00
150. 134.0
100.00 100.
50.00 50.
0.0.0.00 December 2017
December 2018
December 2019
December 2020
202 0
D ecember 2021
December 202 1
Texas’ E&P economy continues to trend upward, with December 2021’s score nearly
29% higher than a year ago, although it is still notably below pre-COVID levels.
Waha averaged $24.28 that month while
HSC averaged $36.93. If the February num-
bers are removed from the calculation,
then natural gas prices averaged $3.53/
MMBtu in 2021. Even without Uri, how-
ever, Mr Ingham said Texas was expecting
an increase in gas demand as the state
recovered from the COVID-19 pandemic.
Average natural gas price in December
2021 was $3.53/MMBtu, a 42% increase
over the December 2020 monthly average
of $2.49/MMBtu.
Rig counts in Texas also improved last
year, although not at the same pace as oil
and gas prices. The statewide rig count
averaged 216 rigs in 2021, an approximate-
ly 4% increase over the 207 rigs in 2020.
The improvement is more striking when
looking at average monthly rig counts,
which increased from a low point of 170 in
January to a high of 275 in December. That
275 is the highest the average rig count has
been since April 2020, when it was 283,
although it’s still well below the 533 rigs
averaged during the last cyclical peak in
October and November 2018.
Total oil well completions dropped by
33.8% from 2020 to 2021, while gas well
completions declined by 24.8%. This drop
was expected after 2020 saw operators
restart a high number of drilled-but-
uncompleted (DUC) wells in 2020.
“The 2020 spike in DUCs happened
because production fell off a whole lot
more rapidly than we expected post-COV-
ID,” Mr Ingham said. “That’s certainly why
we were able to maintain production in
2020 without adding too much to the rig
count. But I think that’s played out now.
We’re adding production, and we’re adding
more rigs, so we don’t need to draw down
DUC inventory.”
Production in Texas is also trending
upwards. For the first time since April
2020, crude oil production exceeded 5 mil-
lion bbl/day in December 2021, according
to preliminary estimates from the Texas
Railroad Commission. Assuming contin-
ued upside price support, then by the sec-
ond half of this year, production is on
target to exceed the previous record of
5.4 million bbl/day, set in March 2020.
Meanwhile, natural gas production con-
tinues to build on the records set in 2020,
moving up from 10.51 million cu ft/day in
2020 to 10.68 million cu ft/day in 2021.
Further, Texas added nearly 16,500 jobs
in the upstream oil and gas sector last
year, according to data from the Texas
Workforce Commission. As of December
2021, an estimated 175,925 people were
employed in the upstream sector, up from
the post-COVID low of 157,330 in September
2020 . DC
D R I L L I N G C O N T R AC T O R • M A R C H/A P R I L 202 2
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