Shaletech Report: Permian activity remains steady with growth through efficiencies

Despite flat activity over the past two years, 2026 for the Permian basin looks moderately promising. Middle Eastern hostilities have pushed up oil prices, as operators continue to squeeze out production gains through additional technology and efficiencies. Some modest output growth is therefore likely.

OLIVIA KABELL, Associate Editor

Major shocks to global oil supply from disruption in Middle Eastern and Venezuelan markets have prompted a significant oil price recovery. While many Permian operators have opted to stay the course in terms of production for first-quarter 2026, some attitudes might change, as oil prices persist in the $90-100/bbl range into the second quarter.

OIL: CURRENT TRENDS

The Permian basin remains the largest oil-producing region in the U.S., and it was responsible for nearly half of the country’s oil in 2025, while during the same time drilling fewer new oil wells compared with the previous year.¹ Predictions for U.S. shale growth have been generally bearish over the last few years, as operators battle plateauing and/or declining output from Tier 1 acreage and expand to Tier 2 and 3 resources. EIA estimates earlier this year remained pessimistic in light of downward-trending oil prices and decreased rig counts, suggesting that 2025’s 6.6-MMbpd production average would go largely unchanged in 2026.²

The minimum price per barrel for both new wells and existing production in the Permian still leans more favorably towards keeping mature assets running.³ The reluctance to increase drilling levels continues, even with massive gains in rig efficiency over the last decade. However, some analysts suggest that sustained high oil prices could see the Permian rig count rise to previous levels of activity, with associated production of up to 7.3 MMbpd.⁴

NATURAL GAS DYNAMICS

Fig. 1. The Blackcomb Pipeline is progressing, with construction underway, including work on compressor stations and the Midkiff lateral, aiming for a third-quarter 2026 completion date. Image: Blackcomb Pipeline.

Natural gas output from the Permian basin continues to grow, reaching 27.7 Bcfd in 2025, with EIA estimates suggesting 2026’s average production will reach 28 Bcfd. Much of that number can be attributed directly to the associated gas produced while drilling for oil in the region, and EIA trends suggest that the gas-to-oil ratio (GOR) will continue to rise, driving natural gas production increases. Meanwhile, offtake capacity remains a critical issue for operators during maintenance season, and at least 500 MMcfd of gas were taken offline in March for maintenance on the El Paso North Mainline.⁵

Late 2025 saw some additional natural gas pipeline capacity, namely from the Matterhorn Express (2.5-Bcfd capacity) and expansions to the Permian Highway Pipeline (0.55 Bcfd of capacity added). However, with production filling this capacity almost faster than it can be built—particularly with recent market upheaval—operators are looking to long-term projects to reduce the strain. Notable among these are the Blackcomb pipeline (2.5-Bcfd capacity) and an expansion to the Gulf Coast Express pipeline (0.57-Bcfd capacity added),⁵ both of which are slated to be online by late 2026, Fig. 1.

Fig. 2. Diamondback is one of the major operators in the Permian basin. Image: Diamondback Energy.

In the meantime, that tight capacity caused Waha prices to dip to record lows in March this year, reaching as far as negative $9/Mcfg, and they are expected to remain weak until more capacity is added later this year.⁵ That trapped supply is prompting some gas producers to take a step back from the Permian gas market.

Following several negative Waha price periods in late 2025—even before March 2026’s record low—Diamondback announced its plans to minimize exposure to Waha prices by shifting natural gas inventory to projects like Basin Ranch power plant, as opposed to competing for limited West Texas hub export capacity. With Diamondback contracted for 50 MMcfd of natural gas supply, the West Texas power plant project will generate 1.3 GW, once it comes online in 2029,⁶ Fig. 2.

OPERATIONAL AND ECONOMIC CHALLENGES

As Permian operators shift from Tier 1 inventories to more geologically challenging Tier 2 and 3 areas, rising costs remain top of mind to keep Permian oil and gas flowing. Even so, high oil prices in the wake of recent market shocks have overridden previous bearish estimates for $50/bbl oil and muddied the waters for Permian operators. While fiscal discipline has been the standard playbook for U.S. shale operators as of late, sustained high oil prices are looking more likely to some analysts in 2026. Some even suggest a return to the Permian 300-rig count mark by the end of 2027,⁴ though rigs are far from the only limiting factor in light of persistent capacity concerns.

Another of the major hurdles that operators face is the excess water that fringe areas frequently produce. However, as some operators are proving, even this challenge could present a new avenue for revenue—one attractive for its distance from oil and gas price volatility. Presenters at the Permian Basin Water in Energy Conference suggested that this excess water could become the ideal solution for emerging data centers across the country, whose demand for water is a pressing concern.⁷ While no deals are yet in place, the precedent has already been set by other Permian producers expanding to natural gas power generation.

One such example was Chevron, which announced a 2.5-GW data center power plant in late 2025, centered in West Texas to take advantage of Chevron’s existing Permian infrastructure.⁸ With low transportation costs and a profitable offtake avenue, the project is likely to be the first of many, as operators seek to fill data center power demand. FID is scheduled for sometime in 2026, with Chevron aiming for first generation in 2027.⁸

BLM ACTIVITY RAMPS UP

In early 2026, the Bureau of Land Management (BLM) leased 31 parcels of land totaling 20,399 acres across New Mexico and Oklahoma, for $326.7 million.⁹ Although there is not an exact breakout of how much of the sale occurred in each state, it is known that it focused heavily on the New Mexico portion of the Delaware basin in the Permian region. The lease sale comes as part of the One Big Beautiful Bill Act, which reversed earlier increases to the federal onshore royalty rate, lowering costs for E&P operations. This sale also featured the highest single-acre bid of any BLM lease sale on national record at $218,751.⁹

Fig. 3. A pump jack in the New Mexico portion of the Permian. Image: BLM.

The momentum continues well into 2026, with two more bidding rounds slated for May and August of this year—one confirmed and one still under review. The first round in May will solicit bids for 74 oil and gas parcels (totaling 33,530 acres) in New Mexico and Texas. The second round will solicit bids on 32 oil and gas parcels (totaling 21,181 acres) across New Mexico, Oklahoma and Texas,⁹ Fig. 3.

In other sectors, the BLM also approved a right-of-way amendment for the Diamondback Lateral Pipeline project in early April, bringing a future 42 MMcfgd to a natural gas power plant near Mohave Valley.⁹

OPERATOR ACTIVITY

Although Permian activity remains relatively flat, the larger operators continue to follow deliberate, prescribed plans for moderate growth in production. What follows are summaries on several of these operators.

ExxonMobil. The company continued to solidify its position as the Permian basin’s leading operator, driving significant production growth following its 2024 acquisition of Pioneer Natural Resources. The company is focused on maximizing capital efficiency through technology and expanding infrastructure to support its high-margin "advantaged" assets. ExxonMobil reported record production levels during 2025, with a 1.6-MMboed average for its Permian acreage. The firm leads all operators in the basin, with a projected 12.5% increase in 2026 to 1.8 MMboed, adding roughly 113,000 bopd. ExxonMobil plans on continued growth in the region, with projections to reach close to 2.5 MMboed in the Permian by 2030.

Fig. 4. Chevron retained a high production volume through efficiencies derived from "cube development" and simulfrac techniques. Image: Chevron.

ExxonMobil continues to deploy advanced technology to improve efficiency. This includes the increased use of a new, lightweight proprietary proppant for hydraulic fracturing to enhance recovery rates. The company also made important investments in infrastructure to handle increased output, specifically the "Cowboy key Connector Pipeline" project, which connects Permian production to the U.S. Gulf Coast.

Chevron. The Permian basin, where Chevron has operated for over a century, remains a cornerstone of its upstream portfolio. The company reached a major milestone in second-quarter 2025 by achieving production of approximately 1 MMboed in the Permian basin. This production level was sustained through advanced drilling techniques and pad drilling, and helped the company achieve record total worldwide production. Despite lowering capital expenditure, Chevron maintained this high production volume through efficiencies in its "cube development" and simulfrac techniques, Fig. 4.

The company also expanded the use of A.I.-driven "Triple-Frac" technology, allowing it to fracture three wells simultaneously. Use of this method, alongside longer horizontal laterals, has contributed to a 15% reduction in cost per barrel over the last three years.

In early 2026, Chevron moved toward a Final Investment Decision (FID) for its first natural gas-fired power complex near Pecos in West Texas. The project is designed to deliver electricity directly to a co-located AI data center, starting with 2.5 GW of capacity (expandable to 5 GW) by 2027. Meanwhile, Chevron on March 31 announced that it, Microsoft, and Engine No. 1 have entered into an exclusivity agreement related to the negotiation of a proposed power generation and electricity offtake arrangement. No commercial terms have been finalized, and there is no definitive agreement at this time.

ConocoPhillips. During first-quarter 2026, ConocoPhillips focused primarily on optimizing its Permian Basin portfolio by initiating the sale of non-core assets while maintaining high production volumes and advancing sustainability initiatives in the region. During February, the firm reportedly was exploring the sale of about $2 billion in Permian basin assets, specifically in the Delaware basin. These assets were all acquired through previous deals with Concho Resources and Shell and are considered legacy or less productive. The sale is part of a greater strategy to meet a $5 billion divestiture target by year-end 2026.

Fig. 5. ConocoPhillips’ Permian output grew a little over 10% last year, due to drilling and completions efficiencies. Image: ConocoPhillips.

The company maintained strong, high-margin production from its core Permian positions. As of early 2026, the company continued to leverage previous efficiency improvements, including a reported 15% year-over-year increase in drilling and completion efficiencies in the Lower 48 by the end of 2025. As of the first quarter of 2025, ConocoPhillips reported production of 816,000 boed from the Permian basin. By the end of the year, company officials were indicating that this output had grown to nearly 900,000 boed, Fig. 5.

On the sustainability and environmental front, ConocoPhillips in February 2026 provided an update on its continued work in the Permian Basin with "Quail Ranch." This 200,000-acre project in Texas and New Mexico focuses on managing habitat and natural resources alongside oil and gas development. Restoration and reclamation efforts include reseeding all rights of way with native seed mixes; reclaiming retired oilfield infrastructure, including pad sites, roads, overhead electric, and frac ponds; restoring degraded rangelands through brush management, reseeding, discing and fertilization; improving ranch infrastructure with wildlife-friendly fencing; and collaborating with universities, agencies, industry partners and NGOs to conduct research and provide outreach and education.

Occidental Petroleum. Last year, Occidental Petroleum (Oxy) achieved record production in the Permian basin, with output reaching roughly 800,000 boed in the third quarter. The company's Permian production for full-year 2025 averaged about 786,000 boed, which represents about 10% of the basin's total output. The third-quarter figure was the highest in company history. The Permian accounts for nearly 70% of Oxy’s total resource base.

Production growth was supported by advanced recovery technologies (including CO₂ EOR) and infill development projects. During first-quarter 2026, Oxy focused on maximizing Permian production through the integration of assets from the CrownRock acquisition of 2024. The company was targeting 766,000 boed to 786,000 boed while planning to bring 460 to 510 new wells online in the region. The company also accelerated its low-carbon transition program, with the Stratos Direct Air Capture plant in Ector County, Texas, entering final commissioning. 

Devon Energy. Based on 2025 performance reports, Devon Energy's production in the Permian basin (particularly the Delaware basin) was the primary driver of its operations, accounting for over half of the company's total output and cash flow. Devon improved its capital efficiency in the Delaware basin by over 15% in 2025, and the company brought 110 operated wells online in second-quarter 2025 alone.

Of Devon’s average 2025 output of 840,000 to 848,000 boed (oil comprising 384,000 to 390,000 boed), two-thirds came from the Permian. The company got 2026 off to a rollicking start by announcing in February that it will merge with Coterra Energy to form a “top-tier” independent operator that would also result in significant synergies. The merger will create one of the world's leading shale producers, with pro forma third-quarter 2025 production exceeding 1.6 MMboed, including over 550,000 bopd and 4.3 Bcfgd. 

Diamondback Energy. The company maintained a strategy of flat production growth throughout 2025 to manage capital efficiently. Nevertheless, Diamondback’s output grew from 475,900 bopd in first-quarter 2025 to 496,000 bopd in the second quarter, and then 503,800 bopd in the third quarter and 512,800 bopd in the fourth quarter. For 2025 overall, production averaged 485,000 to 492,000 bopd.

During first-quarter 2026, Diamondback focused on capital discipline, shareholder returns, and exploratory drilling within its core Permian operations. On the technology side, continued use of Simul-Frac and Trim-Frac techniques is reducing completion times by 20% to 30% and lowering overall unit costs.

Fig. 6. APA Corporation plans to spend $1.6 billion on Permian development while focusing on core assets in the Midland and Delaware basins. Image: APA Corporation.

APA Corporation. For full-year 2025, APA Corporation (formerly Apache Corporation) maintained a Permian oil production guidance range of 125,000 to 127,000 bpd. Despite selling a group of New Mexico Permian assets for $608 million in mid-2025 (which contributed about 12,400 boed or roughly 5,700 bopd), the company held production steady, thanks to efficiency gains, reducing its rig count from 8 to 6.

While focusing on integrating its previous Callon Petroleum acquisition, APA planned to invest about $1.2 billion in Permian development for 2026, a reduction from last year, Fig. 6. Furthermore, an additional $100 million was allocated to base capital projects designed to structurally reduce Lease Operating Expenses (LOE) and improve well uptime. The company also has attempted to high-grade its portfolio, focusing on core assets in the Midland and Delaware basins after divesting non-core assets during 2025. 

REFERENCES

Related Articles

FROM THE ARCHIVE