Both Chevron and Exxon announced that they are seeing plus-30% returns at the current strip in the Permian. Exxon announced that they can profitably drill at $15 oil, making their operation cost-competitive with some of the lowest cost supply regions globally. A major driver behind this activity is scale that the majors are applying in the region. While many of the smaller producers are seeing their WTI differential collapse due to transport capacity bottlenecks, the majors are backing their own midstream projects, ensuring that they have the pipeline capacity to get their oil to market. For royalty and mineral rights owners in the Permian, bigger is better.

Similar to our discussion last week regarding the Marcellus, the midstream infrastructure build-out in the Permian will introduce price volatility into the market, as bottlenecks are relieved and new ones are created. As a landowner, these bottlenecks have major impacts on your royalty checks. Many wells have been drilled, but have not been able to produce, due to lack of infrastructure. As a landowner, it may pay before signing a lease, to do some research to make sure the operator will have the ability to get your oil and gas to market. If you are a landowner that is seeing the value of your checks collapse due to falling prices, ARC can prevent that through our innovative financial products.

Contact Advance Royalty Company to learn more about oil royalties.