In the history of the oil and natural gas industry in the United States, 2016 will be remembered as one of the most eventful in terms of major market developments, asset transactions and developments in public policy. As we approach year’s end, I thought it would be interesting to take a look at some of the year’s major events:

ANDREWS, TX – JANUARY 20: An oil pumpjack works at dawn in the Permian Basin oil field on January 20, 2016 in the oil town of Andrews, Texas.  (Photo by Spencer Platt/Getty Images)

  • The Permian Basin exploded – While other major U.S. oil and gas producing basins – like the Eagle Ford and Haynesville Shale areas – languished in the mire of an ongoing oilfield depression, the multi-play Permian Basin heated up in a big way. Throughout the summer and fall, company after company announced major asset acquisitions in the region, with some, like Pioneer Resources, talking about their ability to profitably drill even with oil prices in the $30-$40 range. As the price for West Texas Intermediate (WTI) ramped up to near and above $50, the region’s rig count escalated apace, to over 250 and still rising.As if the region’s known resources weren’t attractive enough, in early September, Apache Corp. announced a discovery of what it believes to be between 3 and 9 billion barrels of economically producible oil in its Alpine High play. Then, in mid-November, the USGS raised enthusiasm for the Permian even higher with a new, gigantic resource estimate for the Wolfcamp formation.  At year’s end, the oil boom was alive and well in West Texas and Southeast New Mexico, even with WTI selling in the low $50s.
  • Costs of drilling plunged – One of the main drivers of the explosive growth of drilling in the Permian, along with slowly-rising rig counts in other major basins during the second half of 2016 was the ongoing impressive lowering of the costs involved in drilling, completing and operating new wells. At the beginning of the year, it was not uncommon to see operators reporting that such costs had decreased by up to 30% from 2014 levels. But by year’s end, we were seeing some companies, like Oasis Petroleum, reporting that they were now able to drill and complete new wells at half the cost of 2014 levels, due to lower service provider rates, shorter drilling times, and impressive gains in process efficiencies.  Anyone surprised by this likely hasn’t studied much about the history of the oil and gas industry, which is filled with example after example of overcoming diversity through process improvements and the development and deployment of better technologies. Some things never change.