Permian fracking has always been sold as an easy to ramp up or down play depending on company needs. But the very steep Permian decline means any ramp down will quickly reduce overall field production gains. It will take many years to just get back to those field production rates operators spent significant capital to get to. The company’s facility development strategy comes into play also (build as you go or build all). The Permian is now so big for the larger companies it is no longer the easy capital lever like it is for the small independents.
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Can slow or stop drilling any time and resume later when prices improve. In the meantime cash flow will be huge.
Permian and other UC oil plays were ideal way to ramp up production quickly when oil prices are high. Conventional oil plays take too long to ramp up fast but they do provide a floor to maintain cash flow when prices drop.
Big problem in the USA is that companies with only (or mostly) UC oil plays mistook production rate for “success.” Any semi-competent PE can tell you that a company’s success is maximizing free cash flow and often that’s a much different solution than maximizing production rate.
Vicki Hollub bet big on Permian UC oil by grabbing Anadarko. Would’ve been a better bet to take all that cash to Vegas and put it all on red or black.
Of course both big boys CVX and XOM made similar bets on Permian UC oil plays, so they made same mistakes, albeit with much lower debt levels, so they’ll survive (barely). Vicki the Kayaker has k–led Oxy on the year of its 100th anniversary.