Carlsbad, New Mexico is located 150 miles northeast of El Paso, Texas, in the southeastern section of New Mexico. It is well known as the gateway to the vast, bat-filled caves of Carlsbad Caverns National Park.
But what’s really happening in Carlsbad involves oil and gas exploration and extraction. Carlsbad is located on the northwest edge of the Permian oil basin and is the closest city to the Delaware oil basin section of the Permian. The Permian now has a legitimate claim to be the world’s most productive oil field. Horizontal drilling with extended-reach laterals and large pad developments (commonly known as “fracking”) are being used to unlock the vast resource that remains in this oil and natural gas field. In November 2018 the Department of the Interior’s U.S. Geological Survey (USGS) released a report that the Wolfcamp Shale and Bone Spring formations in the Delaware basin located within 50 miles of Carlsbad contain 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas and 20 billion barrels of natural gas liquids.
As a result, nearly every major exploration and production company (E&P) is drilling and extracting oil & gas in the basin. Workers, primarily mid-level and executives, stay for long periods of time in hotels in Carlsbad. Hotel occupancies have increased from 63% in 2015 to over 85% in 2018 and 2019. Similarly, ADR has risen from $150/night to over $200/night. Four new hotels are under construction, but the new supply is expected to be absorbed immediately with minimal impact on ADR and occupancy.