US will need 280-300 rigs to maintain tight oil output once DUC wells run out
 

September 2020

US will need 280-300 rigs to maintain tight oil output once DUC wells run out

ANNUAL SUMMIT 2020
We welcome you to Rystad Energy's 2020 Annual Summit - taking place in a digital format in September. Led by industry thought leaders, the informative, interactive, and inspiring sessions will address the changing global energy landscape and also provide insights on the latest market developments with a regional focus.
Register your interest
.


RYSTAD ENERGY
PRESS RELEASES

Article: US presidents and oil production: A deep dive into Obama and Trump records, Biden’s proposed plan

Article: Even at $40 WTI, about 150 more North American E&Ps will need Chapter 11 protection by end-2022


RYSTAD ENERGY
PRODUCT HIGHLIGHTS

Shale Upstream
Analytics
:
 Monthly reports with insights into key trends and developments in the North American tight oil and shale gas plays, including an overview of M&A activity, productivity metrics, short- and medium-term projections on production, spending, and valuation.

ShaleWellCube: Database with daily updates of official well data for the US, Canada and Argentina, covering over ~1,500,000 wells and permitsIt contains a detailed analysis of well curves, pad drilling, re-frack trends and well economics. A powerful tool that gives an in-depth insight into North American shale and conventional well activities.

Shale IntelligenceReports with unique insights into supply and demand of key service segments of the US shale industry. Provides an industry overview of drivers behind drilling and completions activity, detailed analysis and forecast of the global frac services market, the US frac sand market overview, analysis of the US oilfield water management market as well as an overview of the US stimulation chemicals market.

CONTACT
NAS@rystadenergy.com


Newsletter Subscription: If you are not yet a subscriber to this email or you would like to receive one of our other industry newsletters, please fill out the Newsletter Subscription Form.

Crude production in the US lower 48 states, excluding the Gulf of Mexico, rebounded to 9.2 million barrels per day in July, as large volumes of curtailed production were turned online, according to Rystad Energy estimates. That’s just 11% below the peak output range of 10.3 million-10.4 million bpd posted in the fourth quarter of last year and the first three months of this year.

Our updated estimate for July suggests that the onshore industry likely delivered a significant monthly addition of 750,000 bpd in production as reactivation of wells ended up more than offsetting the natural decline in fields. That’s even more impressive than the 500,000 bpd jump in June. We estimate that about 80% of this growth in June came from tight oil reactivation, while legacy conventional production increased by 100,000 bpd to 1.5 million bpd as offshore Gulf and Alaska production weakness extended from May.

The accelerated reactivation of curtailed US onshore production has now been confirmed by both state well data for the major producing states and the latest EIA-914 survey released yesterday. Total survey-based US oil production for June came in at 10.4 million bpd, perfectly in line with our latest US Oil & Gas production outlook. Hence, the Energy Information Administration’s Short-Term Energy Outlook for August underestimated nationwide oil output by 700,000 bpd and a significant recalibration of the outlook should be expected in the upcoming September issue.

20200901_ShaleWell_PDP_Maturation_Charts_Fig1.jpg

Horizontal tight wells across the country, the main contributor to Lower 48 production, were subject to material production swings during the curtailment period. For example, even mature pre-2016 horizontal vintages, which produced about 1.2 million bpd in first quarter, lost about 350,000 bpd between March and May. Most volumes were restored by July with pre-2016 vintages recovering to 1.1 million bpd. More curtailed volumes were likely brought back in August and September.

20200901_ShaleWell_PDP_Maturation_Charts_Fig2.jpg

Even new wells that were brought online this year saw severe irregularities in the second quarter compared to the normal new vintage build-up seen in previous years. In the 2016-2019 period, oil production from new wells increased every month during the vintage year, typically reaching a peak in December. Last year’s horizontal vintage was the best in the country's history, delivering 4.5 million bpd of new oil in December. This was more than sufficient to offset the record-high base decline of 3.5 million bpd, for pre-2019 vintages between December 2018 and December 2019. Thus, total horizontal oil production increased by 1 million bpd through 2019.

The evolution of the production build-up is dramatically different for 2020-vintage wells. It started the year on a positive note, delivering a record 1.6 million bpd of oil in March amid strong fracking activity in the first quarter and record-high well performance. As the market downturn kicked in because of the Covid-19 pandemic, a lot of wells fracked in March and April were not put on production as per schedule in the second quarter and some wells that were turned online in first three months of the year were curtailed. As a result, new vintage well productivity declined between April and May – a phenomenon that had never happened in the past and the slope of the build-up curve reduced substantially in June and July. As fracking activity saw a moderate recovery and as new wells were put on production in June and August, the positive trajectory of the build-up curve for the 2020 vintage was restored. However, new wells in the second half of this year would hardly offset the decline coming from a strong production base in the first quarter and we anticipate that 2020 vintage wells will only deliver about 2.6 million bpd of oil in December. This corresponds to a 40% decline compared to the peak oil production for the 2019 vintage and even lower than the peak of 3.15 million bpd from the 2017 vintage. With the first year base decline rate of 3.8 million bpd in 2020, it appears that one should not anticipate a continuous recovery in the lower 48 states. About 9.1 million 9.2 million bpd of output is level likely to be maintained in the second half of the year after factoring in the net impact of base decline, curtailment reactivations and low new well activity.

20200901_ShaleWell_PDP_Maturation_Charts_Fig3.jpg 20200901_ShaleWell_PDP_Maturation_Charts_Fig3b.jpg