Increasing productivity of new wells
According to the EIA (U.S. Energy Information Administration), US tight oil production has increased in part due to the increasing productivity of new wells. Growing initial production rates have helped tight oil production to increase despite slowdowns in drilling activity when oil prices crashed in 2014.
Crude oil production efficiency
The average new well in each DPR (drilling productivity report) region (Anadarko, Bakken, Eagle Ford, Niobrara, and the Permian) in 2017 produced more oil than wells drilled in previous years in those same regions. According to the EIA, this trend has persisted for almost ten consecutive years. The increasing prevalence of hydraulic fracturing and horizontal drilling, along with more effective drilling techniques, such as the injection of more proppant during the hydraulic fracturing process and the drilling of longer laterals, has improved well productivity and contributed to the increase in initial production rates.
Companies focusing on drilling longer laterals include Cabot Oil & Gas (COG), whose average lateral length for the 2018 Marcellus Shale drilling program is 8,300 feet. At the end of 2017, Cimarex Energy (XEC) completed 70 10,000-foot lateral Wolfcamp wells in the Permian, including 23 in Lower Wolfcamp and 47 in Upper Wolfcamp. Pioneer Natural Resources (PXD) noted in its first-quarter earnings that its lateral lengths range from 7,500 feet to 14,000 feet in the Permian. Callon Petroleum’s (CPE) wells placed in production in Reagan County (Midland Basin) averaged ~7,300 feet in the first quarter. Diamondback Energy (FANG) reported that its average completed lateral length in the quarter was 9,000 feet.
Well productivity improved despite falling crude oil and rigs
According to the EIA, this increasing well productivity has supported tight oil production even in years such as 2015, when crude oil prices and rig counts were both dropping. In 2016, total tight oil production decreased for the first time in ten years as rig counts continued to decline sharply, and fewer wells were drilled. However, according to the EIA, those wells that were drilled were drilled more quickly were located in more productive areas, leading to higher per-well production and profitability.
Next, we’ll read about the monthly rig count trends in key Drilling Productivity Report regions.