The cliché says that a picture says a thousand words. While I hope to not have to do that here, those that understand the concept of drilling permits to be a forward-looking indicator of drilling (and ideally completion and production) activity, should be able to immediately see the predictive nature of the above pivot table.
Many astute sales people and analysts believe that monitoring daily or weekly drilling permits (or licenses in Canada) will allow them to have a complete picture of future drilling activity. Unfortunately that’s not true. Historically, E&P operators have drilled 50% of approved permits and have associated those decisions with commodity price changes and/or internal resource and/or capital constraints. The build-up and resulting backlog of undrilled and unexpired permits could rightly be called a permit inventory. Like many other inventories, nearly all permits/licenses have a limited “shelf life” and expire over time if not drilled. In seven (7) US states, permits have a two (2) year life, in 17 states permits expire in 1 year, in 10 states permits expire in 6 months.
|Unlike this Like 1||Send|