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December 2016 SEE Monthly Update

Permian Part II: Hottest Basin, and New Administration

As President-elect Trump makes his administrative selections, a pattern of energy regulation different from the current one is emerging.

This is evident in candidates with business backgrounds, notably Rex Tillerson, the soon-to-be-retired head of ExxonMobil, as the choice for Secretary of State. In picking Scott Pruitt to lead the Environmental Protection Agency (EPA), Trump is signaling a much different direction for this organization. Pruitt is the Attorney General of Oklahoma and a frequent plaintiff against the EPA. And although the Department of Energy (DOE) largely focuses on the US nuclear stockpile and nuclear waste, Trump has nominated former Texas governor Rick Perry to head it. Perry, who once suggested getting rid of the DOE, governed Texas through its wind energy start-up and its oil and gas shale renaissance.

The choices of Pruitt and Perry suggest policies leaning toward deregulation. The choice of Tillerson for State acknowledges running a company in the global, trillion-dollar energy industry, one that fuels transportation and trade worldwide, requires a level of international diplomacy.

Investors of all stripes continue to pour money into West Texas-East New Mexico Permian oil assets, particularly the less-developed western half, the Delaware Basin. The Permian overall produces about two million barrels of oil per day, not quite a fourth of the US total of 9.4 million barrels per day.

Similar to last month’s analysis, the intriguing distinction is that Permian acreage is being evaluated on a three-dimensional rather than a two-dimensional basis: an acre with six to twelve hydrocarbon-rich underlying zones is worth more than an acre with one hydrocarbon-rich underlying zone. The Permian is unique among US plays in presenting so many zones which can add up to four to five thousand feet of stacked pay.

The subscriber section compares many of the public companies operating in the Delaware Basin of the Permian. For more information, log in now or, if you are not already a subscriber, subscribe now.

           Copyright 2016, Starks Energy Economics, LLC. This information may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Starks Energy Economics, LLC. This communication is based on information which Starks Energy Economics, LLC believes is reliable. However, Starks Energy Economics, LLC does not represent or warrant its accuracy. This communication should not be considered as an offer or solicitation to buy or sell any securities.

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