Still Big Wildcard With > 4,000 Oil DUCs

Sep 27, 2016


There was good news/bad news for oil markets from today’s EIA Drilling Productivity Report (Sept).  This is the monthly report that provides the EIA’’s estimate for production by major shale/tight play for the next 2 months, in this case Sept and Oct.

The good news is that the EIA forecasts another month of decline in the major plays oil production from 4.465 million b/d in Sept to 4.405 million b/d in Oct.  Plus that is also down from Aug of 4.555 million b/d.   Note, the EIA made an immaterial adjustment to its Sept forecast from last month of 4.470 million b/d, down very slightly to 4.465 million b/d in this month’s forecast.  This reaffirms that US oil continue to decline.    [LINK]

sep27-chart-1

Source: EIA

The bad news is new disclosure to the report.   For the first time, the EIA included an estimate of DUC (Drilled Uncompleted wells) by region.  As of Aug, there were still 5,031 DUCs in the major basins.  The EIA doesn’t split by oil vs gas for the Eagle Ford, but I would assume most, if not almost all, are oil.   Assuming all oil, then there are still 4,117 oil DUCs in Aug, which would only be down 13 oil DUCs from 4,130 oil DUCs in July – only an immaterial reduction in DUCs, which means there are still a lot of DUCs that can add oil production.  If we assume a 30 day IP of 1,000 b/d of oil per DUC across all basins (latest wells in all basins is higher ie. EOG 30 day IP in Eagle Ford is 1,340 b/d of oil or 1,705 boe/d including the natural gas), then every 100 wells would be 100,000 b/d of IP 30 oil additions.   [LINK]

sep27-chart-2

Source: EIA