Energy Prospectus

One of the preferences (or filter) I use when deciding on an oil company is where the majority of their operations are located. From everything I've read on EPG and other sources, the only growing non-OPEC basin is the Permian in West Texas. I'm assuming this includes both onshore and offshore, but please correct me if wrong.

In several reports and podcasts from Goehring & Rozencwajg, they've gone further to state that there are now six counties in West Texas that are 100% responsible for all global production growth. The Permian Basin is pretty large, so I've been trying to identify those six counties. From my research so far, the best I could do is to identify the following counties in Texas as significant contributors to the growth of oil and gas in 2022-2023 (source: Railroad Commission District 8):
1. Midland County (Midland Basin)
2. Martin County (Midland Basin)
3. Upton County (Midland Basin)
4. Howard County (Midland Basin)
5. Loving County (Delaware Basin)
6. Reeves County (Delaware Basin)

These counties accounted for a significant portion of Texas's oil production, with Midland, Martin, and Upton counties alone accounting for over one-third of the state's oil production in September 2022. These counties also ranked high in terms of gas production, with Reeves, Midland, and Loving among the top producing counties​.

I'm not sure if these are the six counties that Goehring & Rozencwajg were specifically referring to since the following New Mexico counties also kept on appearing in my search for top-producers:
1. Lea County (Delaware Basin)
2. Eddy County (Delaware Basin)

I was wondering if anybody might have more insight, or other counties or basins that they believe should be part of a search.

As an aside, the list below are the current Sweet 16 companies that I found with at least a presence in the Delaware and/or Midland Basins. If you're aware of any I might have overlooked, I'd appreciate the feedback.

- Callon Petroleum (Delaware and Midland Basins)
- Earthstone Energy (pure Permian play; all operations in Delaware or Midland Basins)
- EOG Resources (Delaware Basin)
- Diamondback Energy (Delaware and Midland Basins)
- Vital Energy (Delaware and Midland Basins)

Thanks,
Ray

Others in the Permian Basin.

Sweet 16:
Permian Resources (PR) < I'd put this one at the top of your list
Matador Resources (MTDR)
Northern Oil & Gas (NOG) < non-op company with 1/3rd WI in lots of areas that ESTE/PR will be operating.
Callon Petroleum (CPE) < Now a pure play on the Permian Basin
SM Energy (SM)

From our Small-Cap Growth Portfolio:
Riley Exploration Permian (REPX)
Ring Energy (REI)

From our High-Yield Income Portfolio:
Black Stone Minerals LP (BSM) < This one is an MLP
Kimbell Royalty Partners (KRP)
Sitio Royalty (STR)
Viper Energy Partners (VNOM)
Coterra Energy (CTRA)
Devon Energy (DVN)
Pioneer Natural Resources (PXD)

Midstream Companies that serve the Permian:
ONEOK (OKE)
Plains All American Pipeline (PAA and PAGP) < PAA is an MLP and PAGP is a C-Corp. They pay identical dividends.
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Lea and Eddy counties in New Mexico are part of the Permian Basin. If not in the top six producers now, they soon will be. Some of the best new wells I've seen are in Eddy county.

Devon Energy (DVN) is one of my Top Picks for those of you interested in the Delaware Basin. In addition to significant "Running Room" with lots of Tier One leasehold in the basin, Devon pays nice variable dividends ($5.17 in 2022 and estimated to be $3.09 in 2023):

Devon's Delaware Basin activity in Q2 2023:

• Production averaged 420,000 Boe per day (50 percent oil); 63.4% of total production.

• Devon operated 16 rigs and 4 completion crews in the quarter, resulting in 76 gross wells placed online, an increase of 81 percent from the previous quarter. The increase in wells placed online during the quarter was driven by timing of activity associated with a temporary fourth completion crew that was contracted for the first half of the year, as well as efficiency gains that compressed project cycle times.

• The company’s capital program was diversified across target intervals within the Avalon, Bone Spring and Wolfcamp formations. Activity was highlighted by the Mule development in Eddy County that successfully co-developed multiple zones in the Wolfcamp B, with recoveries estimated to surpass 2 million BOE per well. These highly commercial results de-risk and enhance the economic expectations on approximately 100 Wolfcamp B locations across our acreage position in the area.

• In 2023, Devon plans to bring online more than 230 new wells across its Delaware Basin acreage, representing greater than 60 percent of the company’s total capital activity for the year.

Dan and Roadster,

Thank you for the feedback and information!

The Permian Resources / Earthstone Merger Slides are really helpful explaining the valuation approach companies use for M&A, and I learned a great deal reading through them.

Ray