Domestic production expected to continue its decline
...“The drilled but uncompleted well inventory masked steep decline rates over 2015 and into the first quarter of2016, but that backlog is being depleted due to incentives from lower fracture stimulation costs and improved oil prices from the mid-20s in February 2016 to over $42 per barrel currently, where oil companies can earn a modest return on investment by drilling the Permian Basin’s very best acreage in the central Midland Basin and sweet spots in the Delaware Basin.
“The decline in Permian Basin oil production will continue until we see oil prices stabilize above $60 per barrel,” Pruett said. “Low gas prices below $2 per Mcf have not helped support drilling as we produce a substantial amount of gas and natural gas liquids with our oil from our horizontal wells.”
I think part of this is tied to operators having contracts with certain frac companies - and there are limitations as to how quickly these companies can move onto new locations for frac jobs.
Combine this is with a lack of GOOD frac crews and equipment as certain service companies down size.
"The recycle ratio is an important metric because it provides a glimpse of how much money a company is making per barrel of oil equivalent that it produces. To calculate the recycle ratio you take the operating profit per barrel (revenue less operating costs and royalties/taxes) and divide it by the finding and development cost per barrel.
A recycle ratio of 1.0 (like Continental's) means that operating profit equals finding and development cost. In other words the company is breaking even by producing each barrel of oil."
Thanks for the article. This article leads me to the conclusion that acquiring abundant supplies of the cheapest safest cleanest energy (and without artificial incentives of "tax breaks for the 1%") should be the goal of American economic policy.
..."When the shale boom started, the output from the new wells dropped by 90 percent in the first-year itself. By 2012, North Dakota’s Bakken shale four-month decline rate reduced to 31 percent, and in 2015, the decline rate stood at only 16 percent for the same time frame, according to data compiled and analyzed by oilfield analytics firm NavPort for Reuters.
Similarly, in the Permian Basin of West Texas, the drop from the peak production through the fourth month of a new well’s life has improved from 31 percent decline in 2012 to 18 percent in 2015."
"The 'decline rate' of production over the first four months of each well was 90pc a decade ago for US frackers. This dropped to 31pc in 2012. It is now 18pc. Drillers have learned how to extract more."
Is this true? I wonder what a comparison of EURs per drilled foot would look like? When Sheffield says pre-tax production costs of $2.25/bbl, is he referring to lifting cost or ?
I would love to see the data set that is being used to show that unconventional reservoirs are only declining 18% in year one. This is sure not the case in the Permian Basin or Eagle Ford.
I think it's 18% at the end of four months. Has EUR performance per lateral foot drilled tracked the decline rate improvements? What is PXD CEO talking about that costs $2.25/bbl?
OK - I miss read the 4 months - thought it was over 12 months. I can accept the 18% decline number he has posted.
Need for info to figure out what the $2.25 / bbl is. May be the actual operating costs (lease operating expenses and all other charges excluding taxes). Not sure if marketing, SWD, trucking, etc is included in that number
...U.S. drillers spent last week’s earnings conference calls talking up their acreage in the Permian and Oklahoma’s Scoop and Stack regions, areas where companies say they can still make a profit despite depressed oil prices.
The Permian generated Apache Corp.’s highest profit margins in North America — about $17 per barrel, more than double the return of other regions, CEO John Christmann told analysts on Aug. 4. The Houston company’s only active drilling rigs were in the Permian last quarter and its only other wells to start producing oil were in the Scoop, he said.