The cost of drilling and fracking wells in the nation's hottest oil fields is quickly rising — that's if you can book the crews to do the work.
The Permian Basin that lies beneath western Texas and southeastern New Mexico is ground zero for the U.S. shale drilling revival. The basin's geology allows producers to extract oil economically, but contractors are jacking up prices as drillers pile into the region.
That raises concerns for exploration and production companies that are still nursing profit margins back to health after more than two years of low oil prices.
The crunch is due to both supply and demand. A wave of bankruptcies swept through the oil patch last year, weakening or wiping out some of the companies that sell services to drillers. Meanwhile, energy industry dealmaking rebounded last year — and the Permian drove mergers and acquisitions activity.
Oil majors like Chevron and Exxon Mobil — which splurged on a $5.6 billion Permian purchase last month — have signaled they intend to ramp up drilling in the basin as they focus on short-term projects that generate swift returns.