Canadian oil and gas company targets Permian Basin fossil fuels as energy transition looms

A Canadian energy company said it planned to increase its presence in the Permian Basin as the U.S. fossil fuel market remained strong and operations grew in the region.

The Permian Basin was expected to increase oil production in November, according to the Energy Information Administration (EIA), from about 5.4 million to 5.5 million barrels per day.

That’s about half of U.S.’ total output of almost 12 million barrels per day in August, read the EIA’s latest report, as the Permian became one of the most sought-after shale deposits by onshore oil companies.

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Vancouver, British Columbia-based Wedgemount Resources said it planned to buy 640 acres in Permian’s eastern Midland sub-basin, including five leases and 11 producing wells.

The wells were presently producing 25 barrels of oil per day, read a company announcement.

This deal was intended to establish Wedgemount’s presence in the region, and the company said it planned to target several nearby fossil fuel-producing formations in the basin.

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Chief Executive Officer Mark Vanry said the “low-cost” assets would help the company extract from so far unused shale.

“This is a significant step toward Wedgemount’s goal of being a sustainable natural resources company,” he said. “The assets have tremendous production upside potential including low-cost optimization of the existing wells, new vertical and horizontal wells, targeting underdeveloped zones and the implementation of secondary recovery through water-flood.

He said the deal would also help the company establish partnerships with oilfield service companies in the region as it hopes to capitalize on its growth.

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“In addition to adding the Assets to our portfolio, we are establishing a strategic relationship with an outstanding technical and business partner in Texas who offers us a ‘one stop shop’ for oil field services, technical expertise and most importantly local relationships and experience.”

Continued global interest in the Permian Basin followed continually high oil prices, outpacing pre-COVID-19 numbers as energy markets recovered from historic declines.

Domestic oil was trading at about $85 a barrel as of Monday, according to the latest data from the Chicago Mercantile Exchange.

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Oil prices never dipped below $80 a barrel throughout October – a month that peaked at $92 a barrel Oct. 7 and recovered from a low of $76 a barrel on Sept. 26, according to historical data from Nasdaq.

Prices were similar in October of last year, hovering between $75 and $85 a barrel before soaring to $123 a barrel in March 2022 following Russia’s invasion of Ukraine and the aggressor nation’s removal from global markets as the world’s second-biggest oil and gas producer.

The absence of Russia and a subsequent lack of energy supplies in Europe added more strain to U.S. producers and brought continual growth in the nation’s production focused on the Permian.

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On Friday, Baker Hughes reported 346 oil and gas rigs in the basin, holding steady in the last week and growing by 78 rigs in the last year.

New Mexico added a rig in the last week for its total of 106 rigs, up 47 rigs in the last year, Baker Hughes reported.

Texas dropped three rigs in the last week for a total of 368 rigs but saw a growth of 118 rigs in the last year, records show.

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Despite growth in U.S. energy production, analysts cautioned the ongoing “energy crisis” brought on by a reduction in Russia’s energy exports could hasten the transition from fossil fuels, especially natural gas, as the events displayed the volatility of tradition energy sources, read a Thursday report from the International Energy Agency (IEA).

Several nations, including the U.S. via the Inflation Reduction Act, sought to respond to this by enacting policy intended to diversify energy to include more renewable sources like wind or solar, the report read.

This could lead to an increase in global “clean energy” investment, read the report, to more than $2 trillion by 2030, an increase of about 50 percent from today’s levels.

“The environmental case for clean energy needed no reinforcement, but the economic arguments in favour of cost-competitive and affordable clean technologies are now stronger – and so too is the energy security case,” said IEA Executive Director Faith Birol, via the report.

“Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system.”

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.