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Oil Under Fire As OPEC Head Sees No Deal

Oil Under Fire As OPEC Head Sees No Deal

Oil prices dived on Monday…

How To Trade The OPEC Meeting

How To Trade The OPEC Meeting

Weeks of rumors and rhetoric…

The Worrying Math From US Shale Plays

There has been considerable dispute over how many new wells required to keep production flat in the Bakken and Eagle Ford. One college professor posted, over on Seeking Alpha, figures that it would take 114 rigs in the Bakken and 175 in Eagle Ford to keep production flat. He bases his analysis on David Hughes’ estimate that the legacy decline rate for Bakken wells is 45% and 35% for Eagle Ford wells. And he says a rig can drill 18 wells a year, or about one well every 20.3 days.

The EIA has come up with different numbers. The data for the chart below was taken from the EIA’s Drilling Productivity Report.

Percent Legacy Decline Rate

The EIA has current legacy decline at about 6.3% per month for Bakken wells and about 7.7% per month for Eagle Ford wells. That works out to be about 54% per year for the Bakken and 62% per year for Eagle Ford. I believe the EIA’s estimate of legacy decline, in this case, is fairly accurate. For instance last month Mountrail County had over 30 new wells completed yet still declined by 6.4%. And in December 2013 North Dakota declined by 5.22% yet had 119 new well completions.

I have examined the last sixteen Director’s Cuts and gleaned, I think, some important data… I think.

New Well Completions Rig Count

Rig count has averaged 189 rigs per month and has been fairly steady while new well completions has averaged 172 wells per month but has been highly erratic.

Related: Drilling Cutbacks Mean Service Companies Forced to Scrap Rigs

New well completions depend far more on weather and fracking crews than rigs. In October there were 650 wells awaiting fracking crews. At 172 wells per month that is almost a four months’ supply. And that is also what the average spud to completion is, 120 days.

Bakken Change In Oil Production

The Bakken part of the chart above says the Bakken legacy decline was 77,000 bpd but it was 77 bpd in Octber. This fits perfectly with what I found by looking at the 16 month Director’s Cut stats. They showed an average of 172 new wells per month, an average of 555 bpd per new well, (first month).

That is the 16 month average. Of course every month is different. But if we accept the EIA’s legacy decline data then everything fits perfectly. The legacy decline, in October, was 72,951 bpd. But they had a decline of 4,054 bpd in October. That means new production was 68,897 bpd, or 4,054 bpd less than the legacy decline. There were 134 new wells that averaged 514 barrels per day each.

It would have taken 142 new wells to keep production flat in October. They came up 8 wells short.

The situation in Eagle Ford is a little direr.

Eagle Ford Production

Their legacy decline is 81% of current production. If their new well production declines by only 19% then their production will be flat.

Related: Latest Numbers Reveal The Bakken Is Close To Peaking

What will light tight oil production look like in 2015? I can only guess. But I expect Bakken production to continue to increase, at least until mid-year, but at a much lower rate. I think Eagle Ford will start to decline, slightly, by the second quarter.

Rig Counts from Baker Hughes as of Friday January 2, 2015.

Rig Count 1
Rig Count 2
Rig Count 3

North Dakota at 169, is flat for the week but down 28 from the most recent high of 197 in October. Williston Basin, which includes Montana, is at 179. Eagle Ford is dropping but not as fast as North Dakota.

By Ron Patterson

Source - http://peakoilbarrel.com/ 

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