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Pumping the Permian

3/30/2017
By Charles Payne, CEO and Principal Analyst

Perhaps the biggest investment news was out of Big D yesterday, where the Dallas Fed released its business surveys that pointed to big confidence and the return of big projects. Overall, 55% of businesses in Texas reported higher activity, and 46% expect to invest more in capital expenditures.   

More importantly, the optimism is over oil prices.

Crude Price Projection 2017

$50 to $54

34%

$55 to $59

32%

$60 to $64

12%

$65+

5%

Pumping the Permian

This renewed excitement all revolves around the hottest oil patch in the country – the Permian Basin. 

The Permian Basin is largely in the state of Texas, but there is a big chunk in New Mexico as well.  There has been a good old-fashioned gold rush in the area, in addition to a recent wave of billions of dollars of mergers and acquisitions; the oil rig count in the Permian has risen to 315 from 156 in the past year. 

The midland Permian can be operated profitably at $24 per crude, but crude must be at $48 or higher to justify new drilling projects.

By the way, there are two names I like a lot in this area: Concho Resources (CXO) and EOG Resources (EOG). As far as crude oil is concerned, I am looking for $60 at some point in 2017. 

Charles Payne
Wall Street Strategies


 

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