Recent production data from the Energy Information Administration (“EIA”) confirms the Permian basin’s dominance in the U.S. oil production landscape. Oil production in the Permian continues to set new records, with June 2023 oil production reported at a new high of ~5.8 Million barrels per day (MMBPD). This growth is staggering when compared with lows seen during Covid-19 of 3.8 MMBPD during June 2020. In the Permian, with oil, comes a significant amount of natural gas that is associated with oil production. Consequently, in lockstep with growth in oil production, natural gas production has also seen new highs. Since June 2020, gas production in the Permian has grown from ~15 Billion cubic feet per day (Bcf/d) to a whopping 23 Bcf/d – an incremental growth of 8 Bcf/d in just under 3 years! All this gas needs to reach the market in a timely fashion if oil production is to stay on track in the Permian. Needless to say, midstream companies have had their hands full over the past few years expanding existing pipelines and building new mega-pipelines to ensure gas reaches LNG and Mexico markets in the U.S. Gulf Coast – the sort after markets in the U.S.

A few hundred miles east of Dallas Forth Worth metropolis, another basin has had a revival of sorts – the Haynesville basin in northeastern Texas and northwestern Louisiana reached new highs with gas production reaching ~16.8 Bcf/d in June 2023 making it the third-largest shale gas-producing play in the United States just behind the Marcellus/Utica play in the Appalachian Basin and associated gas from the Permian Basin. Like Permian, Haynesville gas also targets growing LNG and Mexico markets in the U.S. Gulf Coast. Competition between these basins is inevitable as both compete for the same premium growth markets – global gas exports via LNG terminals in SW LA and SE TX, pipeline exports to Mexico, and growing industrial demand along the U.S. Gulf Coast. So, what makes Permian such a dangerous competition? For starters, the Permian is an oil-producing basin where the economics for drilling wells is dictated by oil prices. Natural gas is truly a by-product of producing oil and therefore Permian producers tend to be “price takers” with the ultimate objective of flowing natural gas flows to markets so that oil can be produced without constraints. Since natural gas prices do not impact