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Market Chatter: Permian Gas Bottleneck Threatens Producers as Drilling Outpaces Pipeline Capacity

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Higher oil prices earlier this year prompted Permian Basin producers to boost oil output, generating more byproduct natural gas than pipelines could handle and forcing companies to pay buyers to take the gas, according to a report from The Wall Street Journal on Wednesday.

First-half Permian gas prices averaged negative $2.19 per million British thermal units, while Diamondback Energy (FANG) said its gas sales averaged negative $2.15 per thousand cubic feet during the second quarter despite strong oil prices, and Devon Energy (DVN) and APA (APA) curtailed output.

Some companies have instead looked for ways to use more gas within the basin. Matador Resources (MTDR) has expanded the use of its own gas to power drilling operations, while Chevron (CVX) plans to build a gas-fired power plant in West Texas to supply electricity to a nearby Microsoft data center.

Diamondback Energy, Devon Energy, APA, Matador Resources, and Chevron did not immediately reply to' request for comment.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumors and speculation. Accuracy is not guaranteed.)

Price: $204.44, Change: $+4.64, Percent Change: +2.32%

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