Key US shales crude oil production
The EIA (U.S. Energy Information Administration) expects crude oil production to slow down at most of the key US shales by January 2016. According to its Drilling Productivity Report released on December 7, 2015, the EIA expects crude oil production to fall at five key shales by January. However, it forecasts a rise at two other shales.
Overall, aggregate crude oil production at the seven key shales is expected to drop 4.3% by January compared to November levels. It’s expected to fall 2% in December. Aggregate crude oil production at the key shales already fell in November 2015 compared to October.
Bakken and Niobrara may lose, Permian may gain
The Bakken is one of the major crude oil resource shales. It’s expected to see crude oil production fall between November and January. The EIA estimates that it will produce 1.1 MMbpd (million barrels per day) of crude oil in January 2016. It produced 1.2 MMbpd in November 2015. The expected fall is 4.6% by January.
Crude oil production at the Niobrara Shale, one of the smaller crude oil producing regions, is expected to fall 11.8% in the next two months. This is the highest percentage fall among the key shales. According to the EIA, the Eagle Ford Shale is expected to witness an 11% fall in crude oil production over the next two months.
The Permian Basin is the most prolific crude oil producing shale in the United States. It’s expected to increase production by 1.5% by January 2016. The Utica Shale, a much smaller shale oil producing region, is expected to see a 3.6% rise in crude oil production.
How this will affect OFS companies
Changes in production and rig count in key US shales will affect the performances of OFS (oilfield service) companies as well. Lower EIA projected production by January 2016 may affect OFS companies’ revenues and profits negatively. These companies include National Oilwell Varco (NOV), RPC (RES), Dril-Quip (DRQ), and rig operators such as Helmerich & Payne (HP).
National Oilwell Varco forms 4.5% of the VanEck Vectors Oil Services ETF (OIH).