The number one rising housing market in the country is in Midland, Texas. It tops the list of 308 cities with populations over 100,000, according to SmartAsset.
They say the median house value in Midland rose 23% from 2011 to 2015 and median incomes rose almost 20%.
Why would this Podunk city in the middle of hardscrabble West Texas have a booming economy?
Well, they aren’t flocking to Midland to see G.W. Bush’s childhood home, I can tell you that.
Permian Basin
No, they are writing “Texas or Bust” on the side of their F-150s and driving down to make their fortune from the Permian Basin. The Permian is a massive, low-cost oil field just southwest of Midland, Texas. And due to fracking, some companies are pulling oil out of the scrubland at $30 a barrel.
Oil is so much a part of Midland that it’s the only place I’ve ever been that has an electronic sign with the oil price on it:
Today, the price of West Texas Intermediate is a little less than that at $46.16, but the Permian is a hot property. Production is climbing.
In the first week of May, U.S. crude production rose to 8.95 million barrels a day, the highest level since April. Oil rig use expanded to 877, up a monster 462 over last year.
In Canada, the rig count is up by 46 over last year. Internationally it is up by just 10.
In 2016, some 2 million barrels per day (MMbbl/d) — more than 25% of the 8 MMbbl/d of Lower 48 oil production — came from the Permian Basin.
That volume is now up to 2.2 MMbbl/d, and production will to continue to grow. Nearly 40% of the 654 horizontal rigs turning to the right in the Lower 48 today are in the Permian Basin.
The Permian is in West Texas/New Mexico:
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As I wrote back in January, what makes the Permian Basin so special is that it is built like a wedding cake with multiple layers, as you can see from this handy graphic from the Wall Street Journal.
One section alone, the Wolfcamp formation, could hold up to 20 billion barrels of oil worth up to $900 billion. That is three times bigger than the Bakken formation in North Dakota, which has been acknowledged as the largest unconventional oil field ever discovered.
In total, the Permian Basin could hold 75 billion barrels of shale oil, which would put it at number two in the world, right behind Saudi Arabia’s Ghawar field.
If you are looking to buy in the Permian Basin, look to companies with plenty of cash and/or credit as well as lots of acreage. The world’s second-largest oil field in Texas bodes well for American oil independence, as well as oil and gas exporters, manufactures, pipe builders, chemical producers, and all of the downstream oil business.
My good friend and oil hunter Keith Kohl found the one company — trading under $15 a share — with a stranglehold on production. But it won’t stay that cheap for long. Get the ticker here.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
