MIDLAND, Texas—The day-to-day tone in the U.S. oil industry varies with the week’s headlines, but the long-term trend in the Permian Basin remains the same—continued growth in a bullish market, said Daniel Romero, the director of energy strategy for analytical firm Enverus.
Romero spoke at the opening session of Hart Energy’s Executive Oil Conference & Expo on Nov. 20.
Current trends show that the growth in oil demand will continue while the production in many areas around the globe will flatten, leading to a 2 MMbbl/d to 3 MMbbl/d gap between demand and supply, Romero said. Productive areas in the Permian will therefore continue to grow in value, he said.
Permian crude production currently sits above 6 MMbbl/d. Enverus forecasts the basin’s production will be just under 8 MMbbl/d by the end of the decade, meaning that demand for the Permian’s supply will continue to be robust.
Romero said he expects the price of crude to also rise with demand, with the average Brent price per barrel hitting $85/bbl in 2025 and $87/bbl in 2026.
The M&A market, meanwhile, has shown that producers are continuing to bet on the Permian, and productive acreage has grown in value as consolidation since the beginning of the decade has depleted the pool of available players.
The value of the Permian has been reflected with the rising costs of acquisitions. Prior to 2023, the average break-even price for acquired acreage was usually $50/bbl. Over the last two years, the average breakeven price has risen above $55/bbl on acquired acreage.
The massive deals for acreage are in decline as the values increase, he said. Companies instead will be making more creative, smaller deals to get the production they want.
“It does take more of the singles and doubles to put together the inventory you need, versus being able to write that single check that gives you inventory life for the next several years,” Romero said.