Satellite Imagery in the Permian

The December 2018 issue of the Journal of Petroleum Technology (the Society of Petroleum Engineers’ monthly magazine) had a very interesting piece on the use of satellites to track activity in the Permian basin.1

Companies such as Sourcewater, Planet, and Westwood Global Energy Group are stepping up to monitor the world’s busiest oil play by leveraging relatively inexpensive satellite technology and machine learning.  Many of the images are taken using Planet’s “Dove” satellites that are smaller than a shoebox.  The key benefits to using this technology are to:

  • aid planning for development, production, and logistics, and
  • provide competitor intelligence and market research.

Satellite images are also being used to predict new drilling.  A preliminary step in drilling a well is to clear a pad, typically about 1 to 4 months before a rig is moved on site.  This means that satellite imagery analytics could predict drilling up to 4 months before a spud occurs. 

Sourcewater used its satellite analytics to compare how well new pad sites correlate to well permits, as shown below.

It is a new year and the future seems to have arrived: satellites the size of a shoe box are providing vital market and production insights for E&P investors and operators.

Crude Oil Outlook

While futures markets aren’t a crystal ball, their price levels and related options are useful for estimating future ranges, or “confidence intervals,” for crude oil and natural gas prices.

The graphic below illustrates the crude oil pricing as of January 15, 2018 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).  The blue lines are within one standard deviation (σ) of the settlement price (the middle, green line), and the outside, red lines are within two standard deviations for each month (for a refresher on standard deviations, see the January 2016 blog).

Based on January 15, 2018, pricing, the futures markets indicate that in mid-February 2018 the expected strip price is $52.02, with a 68% chance that oil prices will be between $46.00 and $58.00 per barrel.  Likewise, there is about a 95% chance that prices will be between $39.50 and $65.00.  For a longer-term view, by mid-June 2019 the approximate one standard deviation price range is between $42.00 to $68.50 per barrel with an expected value of $53.39.  Strip prices are no longer in backwardnation.

Natural Gas Outlook

The natural gas futures contracts are currently trading at $3.54 per MMBtu for the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in February 2019, the expected price is $3.54 with a +/- 1σ price range of $2.70 to $4.90 per MMBtu, and the 2σ range (95%) of $2.25 to $5.00 per MMBtu.  For a longer-term view, by mid-May 2019 the expected price is $2.84 per MMBtu with a +/- 1σ price range of $2.35 to $3.40 per MMBtu.

 

 1.  Permian Pulse: Using Satellite Imagery Analytics to Track the World’s Busiest Oil Play

Tags: Oil & Gas Price Outlook January 2019, Gas Price Outlook January 2019, Oil Price Outlook January 2019

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