Tom Kirkman

Permian already crested the productivity bell curve - downward now to Tier 2 geological locations

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Houston-based Apache Corp. and a California investment firm are entering into a partnership that will create a $3.5 billion pipeline and energy processing company in West Texas.

The agreement between Apache Corp. and Los Angeles-based Kayne Anderson Acquisition Group will create Altus Midstream LP. Apache Corp. will contribute its midstream assets at its Alpine High shale oil and gas play to Altus Midstream, while Kayne Anderson Acquisition Group will contribute $952 million in cash.

Apache Corp. will own a 71 percent percent stake in Altus Midstream, which will be based in Houston.

The Altus Midstream assets in West Texas’ Permian Basin oil field will include at least 380 million cubic feet a day of natural gas processing facilities, 178 miles of gathering and processed gas pipelines, connections to multiple markets.


The estimated market capitalization of $3.5 billion is based on the assumed sale of 354.4 million common shares at $10 a share.

This article first appeared on the Houston Chronicle

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The EIA Drilling Productivity Report shows  little growth in completed wells over the last several months. We know about the thousands of drilled but incomplete wells. Seems to me lack of take away capacity is the bottle neck until those pipelines are completed.

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Midland-Odessa Economy Continues to Reach New Highs


August 19, 2018

Midland and Odessa’s economies continue to rocket into record territory as the region rebounds from the downturn caused by falling oil prices in 2014-2015.


Karr Ingham, the Amarillo economist who prepares the Midland-Odessa Regional Economic Index for the Midland Development Corp., said, “Coming up with new descriptions for that economy is getting more difficult.”


The June index is 21 percent higher than it was in June 2017, while the Midland index is 20.8 percent higher and the Odessa index 21.3 percent higher than a year ago, according to Ingham. All components of the index posted year-over-year increases for the second quarter, “most impressively so, and remain higher midway through the year as well,” he said in a phone interview.


“This is a pretty stunning turn of events in the overall economy, which saw stunningly high growth rates and rapid recovery from sharp downturns. (But) this is unrivaled – the sheer rate of growth, the rate at which the economy has recovered and grown past its previous highs,” he said. “And the fact is, all this is occurring with a regional oil and gas index that’s nowhere near its peak level.”


He said that trend indicates a shift in the relationship between the general economy and the region’s oil and gas industry. The success area oil and gas producers are having in increasing production despite a lower rig count, fewer drilling permits and commodity prices well below the highs seen in recent years is pushing more and more revenue into the overall economy, he said.


Retail spending in Midland-Odessa continued at what Ingham called a white-hot pace, jumping 42.2 percent in the first half of the year, 42.9 percent in the second quarter and 41.5 percent in June compared to a year earlier.


“Incredibly, the January to June 2018 real spending total is nearly 50 percent higher compared to the total through June 2016, just two years ago in the depths of the general economic contraction induced by an 80 percent decline in crude oil prices,” he said.


In Midland, retail spending was up 37.6 percent in the first half of the year, up 39.6 percent in the second quarter and 36.5 percent in June over the same period of 2017.


In Odessa, spending is up 46.9 percent in the first half of the year, 46 percent in the second quarter and 46.4 percent in June over last year.


Even more impressive, Ingham said, is another component of consumer spending. Automotive spending was up 38.3 percent in the first half of the year, 32.7 percent in the second quarter and 19.6 percent in June over a year ago.


In Midland, automotive spending was up 32.1 percent in the second half, 18.7 percent in the second quarter but a scant 0.8 percent in June compared to 2017 levels.


Still, compared to the growth in real spending, Ingham said the growth in new and used motor vehicles is even more impressive, up 68 percent compared to the January-to-June 2016 total, the low point in automotive spending during the economic contraction.


The unemployment rate has joined other components in record territory, Ingham said. The combined Midland-Odessa unemployment rate of 2.7 percent is the lowest rate ever and a decline of 34.4 percent from the 4.1 percent recorded at the same time last year. Unemployment rates for June and the second quarter are also below 3 percent, with June’s 2.8 percent marking the first time a June rate has fallen below 3 percent, and the second quarter rate averaged 2.5 percent.


In Midland, the June unemployment rate averaged 2.4 percent; it averaged 2.2 percent in the second quarter and 2.3 percent for the first half of the year.


In Odessa, the June unemployment rate averaged 3.2 percent; it averaged 2.9 percent in the second quarter and 3.1 percent in the first half of the year.


Ingham said seasonally adjusted employment data indicates total employment in Midland-Odessa was 178,200 in June, the highest June total on record and a gain of 6.9 percent from 166,700 last June. But the total is down about 900 jobs from the peak of 179,100 in December 2014. He said that gap will close in the coming months and employment “will be in record territory by every measure.”


Midland employment in June totaled 102,400, up 9.5 percent from 93,500 last June, while second quarter employment averaged 101,765, up 10.2 percent from 92,365 the previous year, and 99,850 for the first half of the year, a gain of 10 percent from 90,735 for the first half of 2017.


Odessa employment averaged 75,800 in June, up 3.6 percent from last June; 76,035 in the second quarter, up 4.7 percent; and 75,685 in the first half of 2018, up 5.8 percent.


The only negative in the June index was total building permit valuations, which sank 55.9 percent compared to the previous June, which was the second-highest total on record and second only to June 2013 valuations. For the second quarter, valuations were up 1.2 percent, and for the first half of the year, they’re up 35.7 percent.


In Midland, June valuations were down 4.3 percent from the previous June. Valuations in the second quarter were up 40.6 percent, and valuations in the first half of the year soared 101.6 percent. 


Odessa saw declines in its building permit valuations across the board, with June valuations down 74.4 percent, second quarter figures down 23.6 percent, and first half totals down 14.5 percent.


New housing construction shattered the previous records for the month of June, the second quarter and the first half of the year. Midland and Odessa issued 970 building permits in the first half of the year. That is 33.4 percent higher than was issued in the first half of 2017, which was a record high and more than 42 percent higher than the first half of 2016. The six-month total is higher than the annual total for each year up to and including 2011, Ingham said.


Midland has issued 556 new housing permits so far in 2018, up 22.5 percent from 454 in the first half of 2017. Odessa has issued 414 new housing permits, a jump of 51.6 percent from 273 a year ago.

Existing home sales in Midland-Odessa through the first six months of the year surpassed 2,000 for the first time ever, outpacing the January-to-June 2017 sales total by 8.9 percent. There were 420 homes sold in June, up 1.2 percent from 415 last June. There were 1,214 homes sold in the second quarter, up 11.7 percent from 1,087 in the second quarter of 2017 and a record quarterly total.


In Midland, existing home sales took a breather from year-ago levels. The June total of 272 was down 2.9 percent from 280 last June, while the second quarter total of 765 was up 2.1 percent from 749 last year. In the first half of the year, 1,353 homes were sold, down 1.7 percent from 1,377 last year. 


Odessa saw a much healthier housing market, with the 148 homes sold in June, up 9.6 percent from 135 the previous June. The 449 sold in the second quarter is a gain of 32.8 percent, and the 802 sold in the first half of the year is an increase of 33.2 percent.


Ingham predicts Midland-Odessa will see a decline in growth rates as the region’s oil and gas industry is impacted by the pipeline constraints that have resulted in lower prices for locally produced crude and difficulty moving Permian crude and natural gas to market.


“You won’t have 20-plus percent year-over-year growth in the Midland-Odessa Regional Economic Index indefinitely. Spending growth won’t be above 40 percent indefinitely,” he said.


Even with lower growth rates, the economy will continue to grow, Ingham said.


“Even in the most difficult times, this is the most interesting region economically in the country,” he said.

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Midland Unemployment Falls to 2.2 Percent as Labor Force Tops 101,000


August 20, 2018

A surging oil and gas sector continued to strengthen the Midland labor market in July, according to figures released Friday by the Texas Workforce Commission.


The commission reported the July unemployment rate in its Midland metropolitan statistical area fell to 2.2 percent from 2.4 percent in June and 3 percent last July. Midland reported the state’s lowest unemployment.


The Odessa metropolitan statistical area saw its unemployment rate drop to 2.9 percent from 3.2 percent in June, tying Midland’s western neighbor with Amarillo for the state’s second lowest unemployment.


“We have a very hot economy in the Permian Basin,” observed Willie Taylor, chief executive officer of the commission’s Workforce Solutions Permian Basin.


He noted that the area’s dominant industrial sector, Mining, Logging and Construction, which includes the oil and gas industry, seems to be expanding. In Midland, the sector now comprises 34 percent of its industrial composition, up from an average 32 percent.


Taylor added that Midland’s strong wages – among the highest in the state - reflect the fact “we don’t have enough workers.” He put average weekly wages in the Permian Basin at $1,200 compared to $1,100 statewide “and Midland is even higher.”


“Mining, Logging and Construction is driving the economy; everything else is along for the ride,” he said.


Midland’s civilian labor force topped 100,000, coming in at 101,167, up from 100,082 in June and 93,349 in July 2017.


“Midland has seen an increase of about 1,000 in its workforce every month since January of this year,” James Beauchamp, president of the Permian Basin Coalition, a public-private alliance supporting safe, reasonable development in the Permian Basin, told the Reporter-Telegram by email.

“It is a tremendous increase, and frankly, it is an increase that one, most people are not really aware of, and two, that we are simply not prepared for.”


The coalition recently hosted a regional luncheon at the Petroleum Museum to discuss how infrastructure needs, from roads to housing to pipelines, could hamper the region’s economic growth.


“Most of the Texas Department of Transportation energy sector projects are all centered around the Delaware Basin, so there isn't really much added capacity for roads outside of projects that were leveraged through the Midland Development Corp., such as completion of North Loop 250, and county efforts aimed at the county road extension that could someday serve as South Loop 250,” Beauchamp continued.


He went on to add, “While Midland has had tremendous gains in housing, those gains have not kept up with demand. Additionally, it isn't possible to add additional housing as fast as we are adding people, and as these folks look for places to live, it is going to drive up the price of housing units and rents.”


Infrastructure was also on Taylor’s mind as he told the Reporter-Telegram that infrastructure will play a significant role in the region’s growth. “We want people to be able to bring their families. That means teachers, people in the medical field,” he said.


Midland added 400 nonfarm jobs from June to July, bringing the total to 104,000. The Education and Health Services sector added 400 jobs during the month, followed by the Mining, Logging and Construction sector with 300 jobs. But those gains were offset by the loss of 200 jobs in the Trade, Transportation and Utilities sector and 100 jobs in the Leisure and Hospitality Sector.


For the 12 months from July 2017 to July 2018, the Midland MSA added 9,500 nonfarm jobs for a growth rate of 10.1 percent, a number Taylor called “phenomenal.”


The Mining, Logging and Construction sector added 7,400 jobs, followed by the Leisure and Hospitality sector with 600 new jobs. The Trade, Transportation and Utilities sector added 500 new jobs and the Education and Health Services 400 new jobs. Some 300 new jobs were added in the Professional and Business Services sector while the Manufacturing sector, Information sector and Other Services sector each added 100 new jobs.

“We’re going to continue to see growth. We can’t just sit back and watch it,” Taylor warned.


The area’s cities and counties need to get aggressive in addressing how they’re going to handle the growth, he said. And, he added, “We need to look at our mentality towards growing communities.”


He said continues to encourage younger residents “without skills to go to the local colleges and upgrade their skills. It can make the difference between making $15 an hour and $20 an hour.”


Statewide, the unemployment rate remained at 4 percent in July. The Workforce Commission said the state added 23,500 seasonally adjusted nonfarm jobs, marking 25 consecutive months of employment growth. For the year, the commission says the state has added 377,100 jobs for an annual employment rate growth of 3.1 percent.


While Midland reported the lowest unemployment, McAllen-Edinburg-Mission posted the highest at 6.9 percent.


Midland Unemployment

January 2018 2.4 percent
January 2017 4 percent

February 2018 2.5 percent
February 2017 3.8 percent

March 2018 2.4 percent
March 2017 3.5 percent

April 2018 2.1 percent
April 2017 3 percent

May 2018 2.1 percent
May 2017 3 percent

June 2018 2.4 percent
June 2017 3.2 percent

July 2018 2.2 percent

July 2017 3 percent


Preliminary numbers for July with June numbers in parentheses:

Midland 2.2 (2.4)
Amarillo 2.9 (3.1)
Odessa 2.9 (3.2)
Austin-Round Rock 3.1 (3.2)
College Station-Bryan 3.3 (3.5)
Sherman-Denison 3.3 (3.6)

Lubbock 3.4 (3.6)
San Angelo 3.4 (3.6)
Abilene 3.5 (3.7)

San Antonio-New Braunfels 3.5 (3.7)
Dallas-Plano-Irving 3.6 (3.8)
Fort Worth-Arlington 3.7 (3.8)
Tyler 3.7 (3.9)
Wichita Falls 3.7 (3.9)
Waco 3.9 (4.1)
Laredo 4.0 (4.3)
Victoria 4.1 (4.3)
Killeen-Temple 4.2 (4.4)
Longview 4.3 (4.5)
El Paso 4.4 (4.7)

Houston-The Woodlands-Sugar Land 4.4 (4.6)
Corpus Christi 5.2 (5.5)
Texarkana 5.3 (5.6)
Beaumont-Port Arthur 6.3 (6.4)
Brownsville-Harlingen 6.6. (6.9)
McAllen-Edinburg-Mission 6.9 (7.2)

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