Beginning
in September 2016, the United States Energy Information Administration (EIA)
began to include estimates of the number of drilled and uncompleted wells
(DUCs) in its monthly Drilling Productivity Report. This data is critical
to gaining an understanding of where U.S. oil production may be headed,
information that provides us with a measure of whether there will be upward or
downward pressure on future oil production, a key factor in future oil prices.
Drilled
and uncompleted wells are those wells that have been drilled but are standing
suspended (i.e. they are not producing hydrocarbons). These wells have
production casing in place but potentially productive formations have not been
perforated or hydraulically fractured (i.e. completed). Obviously, a high and growing
inventory of drilled and uncompleted wells has the potential to impact the
domestic supply of oil, a factor which has the potential to impact oil prices,
especially in the current market where the balance between oil supply and
demand is quite delicate.
The
drilled and uncompleted wells reported by the EIA fall into one of seven
regions; the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and
Utica as shown on this map:
Here
is a bar graph showing the how the number of drilled and uncompleted wells in
the lower 48 has grown since the data was first reported in August 2016:
In
just nine months, the number of drilled and uncompleted wells has grown from
5065 to 5512, an increase of 8.8 percent.
Here
is a table showing which regions have the most drilled an uncompleted wells in
both February and March 2017:
As you can see, the two regions with the most drilled and uncompleted wells are located in the Permian Basin and Eagle Ford of Texas.
While
oil production is down from its peak of 9.627 million BOPD in April 2015,
according to the EIA, United States oil production is rebounding from its lows of 8.567
million BOPD in September 2016 to 8.835 million BOPD in January 2017 as
shown here:
From
the EIA data on drilled and uncompleted wells, we can see that it is quite
likely that oil prices will be under downward pressure for some time to come
unless, of course, OPEC agrees to cut production levels further or a
significant number of these wells turn out to be poor producers.
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