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December 9, 2013

EIA's Drilling Productivity Report

December 9, 2013
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The Energy Information Administration (EIA) recently released a new report on drilling productivity that provides estimated changes in oil and gas production for six key oil and natural gas fields depicted below.[i] These six regions accounted for almost 90 percent of domestic oil production growth and almost all domestic natural gas production growth between 2011 and 2012.

mapus

EIA estimates oil and natural gas production by combining the volumes of new production from recently drilled wells with the effects of declining production from existing wells. The natural loss of production from existing wells is made up from new-well production based on the number of drilling rigs in operation. The amount of production coming from new wells must exceed the loss of production from existing wells for oil or natural gas production to grow.

New wells are produced from available drilling rigs, which is a major parameter in EIA’s analysis. EIA does not distinguish between oil-directed rigs and natural gas-directed rigs because once a well is completed it may produce both oil and gas, which is the case for more than half of the wells in production. In 2007, 37 percent of the wells produced both oil and natural gas; in 2012, 56 percent produced both oil and natural gas. The EIA Drilling Productivity Report uses data on the total number of drilling rigs in operation, estimates of drilling productivity (wells drilled per active rig), and estimated changes in production from existing oil and natural gas wells.

Drilling Productivity

EIA analyzes drilling efficiency using the average number of wells a rig can drill over a period of time as well as a measure of how productive each new well is expected to be. EIA estimates drilling efficiency (the number of wells drilled per rig each month) by tracking the number of rigs in a play as well as the number of new wells started each month. It then uses an appropriate lag for each region based on changes in the rig count relative to changes in new-well counts to estimate how many new wells were started and should begin producing. After drilling, the time it takes to prepare a well for production can vary due to the availability of completion crews, market pricing of the commodity, and/or lack of infrastructure to move the product to market. The graphs below show the drilling efficiency and well productivity for the Eagle Ford shale formation.

Screen Shot 2013-12-05 at 1.00.30 PM

Source: Energy Information Administration, http://www.eia.gov/todayinenergy/detail.cfm?id=13651

New Well Production per Rig

The table below contains EIA’s estimates for new well production per rig for each of the 6 regions for November and December 2013. The Marcellus ranks first among the 6 regions in new-well natural gas production per rig and the Bakken ranks first among the 6 regions in new-well oil production per rig. Average new well oil production per rig from all 6 regions in December 2013 is estimated at 241 barrels per day, up by 5 barrels per day estimated for November. For natural gas, average new-well production per rig from all 6 regions in December 2013 is estimated at 1,242 trillion cubic feet per day, up by 20 trillion cubic feet per day estimated for November.

New-well production per rig by region

Production by region

New-well oil production per rig
barrels/day
New-well gas production per rig
thousand cubic feet/day
Region

November 2013

December 2013

change

 

November 2013

December 2013

change

Bakken

481

496

15

 

462

470

8

Eagle Ford*

405

413

8

 

1,213

1,214

1

Haynesville

44

45

1

 

5,018

5,041

23

Marcellus

38

40

2

 

5,920

6,038

118

Niobrara

311

317

6

 

1,049

995

(54)

Permian*

79

79

0

 

175

176

1

Rig-weighted average

236

241

5

 

1,222

1,242

20

*EIA has expanded the Permian and Eagle Ford regions to include more counties. The expanded geographic regions increase historical production levels because production from all wells contained within the regional boundary is included. Source: Energy Information Administration, http://www.eia.gov/petroleum/drilling/

Estimated Oil and Gas Production for the Eagle Ford Basin (November vs. October)

The next graph depicts EIA’s methodology for the Eagle Ford Basin in Texas. Oil production in October 2013 was 1,069 thousand barrels per day. The EIA estimates oil production from new wells in November 2013 to be 105 thousand barrels per day, which offsets the loss from existing wells by 24 thousand barrels per day. That makes estimated total oil production in November 2013 from the Eagle Ford at 1,093 thousand barrels per day. The analogous depiction for natural gas is shown below where there is expected to be an increase of 128 million cubic feet per day of natural gas production from the Eagle Ford in November 2013.

graphq1

Source: Energy Information Administration, http://www.eia.gov/todayinenergy/detail.cfm?id=13671

Rig Counts

The next set of graphs compare the current rig count to the estimated number of rigs needed to sustain the prior month’s production for oil and natural gas for two shale regions: the Bakken in North Dakota and Montana and the Eagle Ford in Texas. The fact that the rig current is more than what is needed to sustain production is indicative of the large increases in domestic oil and natural gas production that the nation is seeing.

Screen Shot 2013-12-05 at 12.58.21 PM

Source: Energy Information Administration, http://www.eia.gov/todayinenergy/detail.cfm?id=13671

Oil and Gas Production for the Six Basins

The next set of graphs compares oil production and natural gas production estimated for each of the 6 regions in December 2013 using the above methodology to oil and natural gas production in December 2012. The greatest increase in oil production is expected from the Eagle Ford shale formation in Texas, which along with the Permian Basin is also expected to produce the most oil in December 2013. The productivity gains and the current rig count in the Eagle Ford and Permian regions comfortably offset the current decline rates from existing wells.

The Marcellus shale formation is expected to produce the most natural gas in December 2013 among the 6 regions and is also expected to produce the greatest increase in natural gas production compared with production in December 2012.

Screen Shot 2013-12-05 at 1.02.08 PM

Source: Energy Information Administration, Drilling Productivity Report, http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf

Highlights of Findings

A summary of the main findings include[ii]:

  • Increases in drilling efficiency and new well productivity have been the main drivers of recent growth in domestic oil and natural gas production.
  • Oil production from the Bakken and Eagle Ford regions accounted for approximately 75 percent of current monthly oil production growth across the six regions. Oil production in these two regions increased by almost 700,000 barrels per day over the past year.
  • Oil production from the Permian region, which is the biggest absolute oil producer, grew by about 93,000 barrels per day from last year’s production level.
  • The Marcellus shale formation accounted for about 75 percent of the growth in natural gas production among the six regions.
  • Total wellhead output in the Bakken region should exceed 1 million barrels of oil per day in December. The Bakken region now accounts for more than 10 percent of total domestic oil production and is expected to be the fourth region (along with the Gulf of Mexico, Eagle Ford, and Permian basins) to produce more than 1 million barrels per day in the nation in December. Infrastructure improvements in the central part of the nation helped to move more of the Bakken oil to refineries in recent months.[iii] (See chart below.)
Screen Shot 2013-12-05 at 1.02.58 PM

Source: Energy Information Administration, http://www.eia.gov/todayinenergy/detail.cfm?id=13811


[i] Energy Information Administration, Drilling Productivity Report, November 2013, http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf

[ii] Energy Information Administration, Highlights of new Drilling Productivity Report, October 22, 2013, http://www.eia.gov/todayinenergy/detail.cfm?id=13471

[iii] Energy Information Administration, Bakken oil production forecast to top 1 million barrels per day next month, November 15, 2013, http://www.eia.gov/todayinenergy/detail.cfm?id=13811


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