Drilling Efficiency

Crude oil and natural gas production growth stalled in 2015 and has declined this year in some of the big shale basins.   But we may be seeing a turnaround.  The latest EIA Drilling Productivity Report, released on December 12, 2016, included upward revisions to its recent shale production estimates and also projects an increase in its one-month outlook for the first time in 21 months (since its March 2015 report). Today we break down the latest DPR data.

The Energy Information Administration’s (EIA) latest U.S. monthly crude production statistics published March 30th show January production down 135 Mb/d versus December 2014, the largest month-on-month decline since June 2011.  There was an earlier warning sign from EIA.  The agency’s Drilling Productivity Report (DPR) published March 9th predicted that production would decline in April in three major U.S. oil production regions – Bakken, Eagle Ford and Niobrara. Since oil and NGL prices crashed last fall, the market has been watching with bated breath for the first signs of a production slowdown. Certainly rig counts have nosedived amid producer budget cuts in 2015. But are we really seeing the beginnings of a long-term slowdown just yet?  Was the DPR a harbinger of the January production decline? The clues lie within the DPR report.  Today’s blog parses DPR methodology, assumptions and risks as well as contributing market factors to get to the bottom of what is driving those reported production declines.

Last month the Energy Information Administration (EIA) debuted a new monthly report detailing oil and gas drilling productivity in six of the largest US production basins. Rather than just being an “after the fact” report telling us what happened in the past, the new report provides a forecast of oil and gas production for the current and next month out in each of the six basins. The initial report indicates that oil production will increase by roughly 60 Mb/d in these basins during November with gas production increasing by 0.4 Bcf/d. The report also highlights continued improvement in rig productivity. Today we begin a series interpreting the new drilling rig productivity data.