The Daley Note

The hunt for crude oil resources is leading more Permian operators to decamp to the Delaware sub-basin. The migration to the Delaware is rippling through the industry in numerous ways, from planned infrastructure investments to the focus of mergers and acquisitions.

Historically, the Delaware Basin has been less explored than the Midland, for several reasons. Parts of the Delaware spans federal lands in New Mexico, creating more permitting hurdles compared to industry-friendly regulations in West Texas. Benches in the Delaware tend to have higher gas content than in the Midland, a drawback when producers are targeting liquids. Moreover, much of the gas in the Delaware contains high sulfur and carbon dioxide content, requiring additional treating to make it suitable for use in residue pipelines.

Despite these factors, operators are steadily investing more in the Delaware relative to the Midland. Rig counts in the Delaware accounted for nearly 58% of total Permian Basin activity in 2025, up from a 51% share of rigs in 2021 (see figure). Ten years ago, the Delaware represented only 45% of Permian rigs, according to historical rig data in East Daley’s Energy Data Studio.

The rise of the Delaware reflects the realities of a maturing industry: The basin’s more extensive underdeveloped acreage means there is more runway for growth compared to the Midland. As a result, producers are willing to tolerate more gas and NGL content, and higher gas treating expenses, to maintain robust oil production.

In the 2026 Dirty Little Secrets, East Daley Analytics reviews how the transition to the Delaware is changing the outlook for US energy and the industry at large.

The most important consequence is the divergence in the production outlook between crude oil and natural gas and NGLs. Gas-to-oil ratios (GOR) are rising in the Permian Basin for several reasons, and the migration to the Delaware is a primary contributor. Since Delaware wells produce more gas than those in the Midland (see figure above), methane is becoming a larger share of overall Permian output as more wells are drilled there. While East Daley forecasts relatively flat Permian crude oil production through 2030, we expect robust growth ahead in gas and NGLs.

Delaware growth in turn is driving infrastructure investments. Most notable is the boom underway in new gas pipelines. Several greenfield projects are planned to increase gas takeaway, including WhiteWater’s Blackcomb Pipeline (+2.5 Bcf/d) and Eiger Express (+3.7 Bcf/d), and Energy Transfer’s (ET) Hugh Brinson Pipeline (+1.5 Bcf/d) and Desert Southwest (+2.3 Bcf/d). We anticipate over 10 Bcf/d of new Permian gas egress by 2030, strengthening Waha prices as takeaway constraints ease.

Growth in the Delaware is also driving industry consolidation. The largest midstream deals in 2025 targeted G&P assets in the Delaware, where companies anticipate future growth. These include MPLX’s $2.4B acquisition of the Northwind system, Kinetik’s (KNTK) $765MM deal for Durango Midstream, and Targa Resource’s (TRGP) $1.25B purchase of Stakeholder Midstream.

See the 2026 Dirty Little Secrets for more information on the Permian outlook. – Alec Gravelle and Andrew Ware Tickers: ET, KNTK, MPLX, TRGP.