Shale oil is booming again in the Permian Basin

Oil prices above $80 a barrel are once again spurring a revival of shale drilling in America’s biggest oil field, where production is expected to return to prepandemic highs within weeks.

Only this time, the surge is being driven by private operators, rather than the publicly traded companies that fueled the previous booms. And they see little reason to slow things down.

Increased access to financing and strong oil demand have created an opening for closely held producers, most of which are backed by private equity or family money, to ramp up output in West Texas and southeastern New Mexico. With the other major U.S. shale basins either holding steady or declining, according to Bloomberg-NEF, the surging growth in the Permian isn’t likely to risk upsetting OPEC or tanking crude prices as it did in previous shale booms — at least not yet.

“It’s a win for the privates without being a loss for the oil markets,” said Raoul LeBlanc, an analyst at IHS Markit Ltd. “The big takeaway is that private growth won’t ruin the party.”

It’s a tenuous balance, and one that could shift quickly if oil prices continue to march higher. U.S. production growth was so strong over the past decade—and took so much market share from OPEC and its allies—that the cartel was willing to engage in all-out supply wars in both 2014 and 2020. The temperature has since come down as global demand for oil surges, especially amid a need to supply fuel-hungry Europe and Asia, removing some competitive pressure between suppliers.

That dynamic is exactly the signal private drillers have been waiting for. Trigo Oil & Gas LLC, three-person upstart company, just drilled its first two wells in Reeves County, Texas, near the New Mexico border, with a third on the way. After spending most of the pandemic trying to finance the wells, Trigo scored deals in August with two Oklahoma City-based investors, right before a lease was about to expire, said its 37-year-old CEO, Travis Wheat.

Private oil companies like Wheat’s will make up more than half of U.S. production growth next year, Rystad Energy said.