Permain Basin oil price differentials

[dan_s]

It appears that Cimarex Energy (XEC) and Diamondback Energy (FANG) have the most exposure to the big oil price differentials in the Permian Basin that are being caused by lack of pipeline takeaway capacity.

Plains All American (PAA) has upside because of the big demand for midstream services in West Texas.

[jb2257]

Do you have any idea how long it will take to work out the problems in the Permian? I'm trying to figure out how much pain we have to endure with that group.

[dan_s]

Midstream companies are working on it now, but pipelines are not expected to fully catch up with Permian production until the end of 2019.

See my comments on this topic under The View From Houston tab.

Remember, this only impacts a small percentage of the Permian oil. Over 90% will fit into the existing pipelines. The rest will be taken out by rail or truck.

There are actually two different issues impacting the Brent to WTI spread:
1. We are now producing more ultra light crude oil (over 40 degrees API) than our refineries can handle.
2. The takeaway capacity shortage in the Permian Basin, where most of the U.S. production growth is coming from.

Raymond James sent out a detailed "Energy Stat" on this yesterday. If you want to see it, send me an email at dmsteffens@comcast.net (don't email Sabrina for this).

[dan_s]

Some companies are going to benefit from this. Read my comments about Lonestar Resources (LONE).

There are many different ways to sell the produced oil, gas and NGLs. Good marketing groups make a BIG difference.