Produced Water

High Country News: There’s a new boom in the Permian Basin — wastewater

In five years, the Permian is forecast to generate 32 million barrels of produced water per day, up from four million a day currently. By 2030, that number could rise to 38 million barrels daily, analysts say. And it will be increasingly difficult to dispose of the wastewater. Industry analysts say the basin will eventually run out of suitable places to drill disposal wells — another incentive for oil and gas operators to recycle.

From the Raymond James report linked above:

In our forecast and this piece, we have placed an undue focus on the Permian basin, particularly the Delaware. While most readers will know it is the heart of U.S. oil activity, there is a particular reason why it is top of mind for produced water. New wells in the Delaware Basin are coming online with water-oil-ratios as high as 10-to-1, a level of water production typically exhibited in a decades-old conventional well. Across the basin, initial WORs of 4 or even 6-to-1 are viewed as “normal.” This is in contrast to other prolific shale basins such as the Midland, Eagle Ford, and Bakken, where WORs start at a 1-2x range, and expand slowly to 2-5x. In the graph on the left, we forecast water production grows to over 32 million barrels per day by 2025, for a CAGR of 10% over the period. As the Permian basin shifts further into manufacturing mode, the water growth we project will create the need for nearly 1,000 additional salt water disposal wells by 2030. Even taking an impossibly bullish outlook with water recycling (100% of frac water coming from recycling), we will still need ~750 additional disposal wells in the Permian Basin (more on this below). By 2030, we predict there will be a total need for ~1750 salt water disposal wells, assuming 80% utilization. While many companies involved in SWDs cite 80% as their target utilization, water pressure at the surface and in the formation can limit disposal capabilities, meaning demand for SWDs may be closer to 3,000 under realistic utilization assumptions. This incremental demand for SWDs we estimate represents a $7-$9 billion dollar investment in the Permian Basin alone.

Margin Watch

2019 margin analysis

My way of backing into water.  Back non-water revenue out of EBITDA.  Add “old expenses” and legal (big $$$$) to the adjusted EBITDA number to get a ballpark water income.  Look at water income relative to water top line to observe expenses and margins.

Seperately we can look at margin without asset sales.

Both margins are contracting.

It is understood that one has to spend money to make money, expecially in the water business, but I’d love more information on the end game.