(2026057) Ozona and Sonora Canyon Gas Field Revival Turning P&As into P1 Reserves to Help Meet the Massive LNG and Data Center Natural Gas Needs

While the west Texas natural gas industry has been on life support since 2008 with low prices and inadequate takeaway capacity it is on the verge of a major revival in order to meet upcoming major LNG and data center demand increases.   These plants and data centers will require 18-24 BCFD of incremental supply over current levels in the US by 2030.  Based on EIA projections it is expected that the Permian will provide up to 45% of this incremental demand.  For the first time since 2018 West Texas pipeline investors saw this demand coming well in advance and are responding in force to put in enough takeaway capacity to help meet the need for incremental production.  The expected additions to the Waha system in 2026 are staggering with 6.6 BCFD of additional takeaway capacity increasing to over 10 BCFD by 2028.  On the supply side the latest expected incremental supply growth from West Texas is less than 1.4 BCFD in 2026 and 0.6 BCFD in 2027 and 2028.   When this is combined with an expected 32 GW of incremental demand from Texas data centers alone by 2028 the demand for gas looks pretty strong.  Each GW of generating capacity requires 160 MMCFD of feed gas for the turbines or an incremental 5.1 BCF of demand by 2028 that will not be heading to the LNG plants.  Between the newly added capacity expansions and huge expected demand growth West Texas gas has the potential to be the next $100 oil at a time when oil prices are struggling to stay above $60.  At a minimum Waha should be on par or better than Henry Hub which was the case prior to the capacity bottleneck pricing disaster of 2018-2026.  With virtually zero drilling and recompletion activity in Permian basin dry gas reservoirs since 2008 this represents a major ramp up of gas production from legacy fields that have had little or no activity for the last 18 years.  The bulk of the current expected increase comes from associated gas from horizontal oil wells which is the most of the 1.4 BCFD expected 2026 West Texas supply growth expectation.  Significant volumes of incremental gas supply from dedicated gas wells must be added to meet the expected demand growth without focusing on dedicated gas wells.  The oil focused shales in the Permian would need a significant increase in rig and frac crew count to meet this demand with oil well associated gas alone.   Prior to the price spikes from the Iran conflict the EIA was forecasting +/- $55 oil in 2026.  Once this temporary increase in prices ends it is unlikely that this will forecast change significantly.  Without a significant sustained increase in oil prices the oil focused rig and frac crew count will not follow and thus significant additional supply is probably not going to come from associated gas.  The bulk of the incremental gas must come from 100% gas producing wells in the Permian Basin.