Will Investor Hesitation Destabilize a Thriving Permian Basin?

As the United States’ oil and gas industry continues to gain momentum, one of the most prominent performers has been Texas and New Mexico’s Permian Basin. Over the last few years, the Permian has come to represent the United States’ growing dominance in energy production. In recent months, however, some unexpected financial choices from some of the nation’s largest hedge funds have begun to make some investors wonder about the future of the Permian Basin.

Will the vast shale deposit continue to remain one of the United States’ most active oilfields, or does the future of oil and gas lie elsewhere in the nation?

Some Big-Name Hedge Funds Are Taking Money Out of the Permian

In recent weeks, eight prominent hedge funds have withdrawn more than $400 million from ten of the Permian Basin’s most active shale firms. While the hedge funds didn’t completely cut off funding for oil and gas companies, they did remove a sizable portion of their investment for companies based solely in the Permian Basin, known as “pure-play companies.”

On portfolio manager for a Dallas-based hedge fund said, “We’ll have to see if these U.S. producers have the discipline to not go crazy,” adding that too much of a production increase in the region could jeopardize oil and gas prices worldwide.

Hedge Fund Investments Might Not Be Necessary

With or without that $400 million, oil and gas in the United States looks to be more than strong enough to absorb the blow. In June of 2017, Dallas’ branch of the Federal Reserve Bank released a glowing report about the state of the industry.

Jobs are up, production is up, and the state seems more than capable of withstanding any potential disruption of the price of oil per barrel.

It’s Too Soon To Pull Funds From the Permian

As the oil and gas industry emerges from the worst sector downturn since the 1980s, executives and independent operators throughout the United States are looking ahead with cautious optimism. The last two years has taught oil and gas a difficult, but invaluable lesson: the best way forward is slowly and thoughtfully.

With the rapid increases in projects throughout the nation, the current industry climate might appear a bit sloppy as it develops, but you can rest assured that execs throughout the industry are still keenly aware of the hardships of the past two years. Though hedge funds might be withdrawing because the Permian boom looks reckless, the oil and gas industry is still expanding with its past in mind, and that should secure profits for the foreseeable future.

Posted in Industry News.