• 4 minutes Europeans and Americans are beginning to see the results of depending on renewables.
  • 7 minutes Is China Rising or Falling? Has it Enraged the World and Lost its Way? How is their Economy Doing?
  • 13 minutes NordStream2
  • 6 hours Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav
  • 4 hours California to ban gasoline for lawn mowers, chain saws, leaf blowers, off road equipment, etc.
  • 6 hours "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change" - Zero Hedge re: Bank of America REPORT
  • 51 mins GREEN NEW DEAL = BLIZZARD OF LIES
  • 3 days "A Very Predictable Global Energy Crisis" by Irina Slav --- MUST READ
  • 21 hours U.S. : Employers Can Buy Retirement Security for $2.64 an Hour
  • 1 day Nord Stream - US/German consultations
  • 3 days An Indian Opinion on What is Going on in China
  • 3 days Can Technology Keep Coal Plants Alive and Well?
  • 4 days Succession Planning in Human Resources for Vaccinated Individuals in the Oil & Gas Industry
  • 9 hours Forecasts for Natural Gas
  • 18 hours Australia sues Neoen for lack of power from its Tesla battery
  • 3 days Storage of gas cylinders
  • 4 days Two Good and Plausible Ideas about Saving Water and Redirecting it to Where it is Needed.
OPEC Cuts 2021 Oil Demand Forecast

OPEC Cuts 2021 Oil Demand Forecast

In this month’s report, OPEC…

OPEC+ Meeting Ends With Minor Oil Production Hike

OPEC+ Meeting Ends With Minor Oil Production Hike

The OPEC+ meeting has ended…

Rystad Energy

Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products. Rystad Energy’s…

More Info

Premium Content

U.S. Shale Industry Accelerates As Oil Prices Rise

The number of drilled but uncompleted wells (DUCs) that accumulated at the height of the pandemic has already subsided to pre-Covid-19 levels in the US, a Rystad Energy analysis shows. After swelling to a multi-year high of 6,548 wells in June 2020, the number of such wells in the country’s major oil regions* slimmed down to around 5,700 wells by the end of December 2020.

The inventory of ‘live’ DUCs, which excludes tentatively abandoned wells drilled a long time ago, also declined by around 800 wells in the same period, from 4,353 in June to 3,528 in December. The current level of horizontal oil ‘live’ DUC count is comparable to the level seen in early 2020, just before the market downturn started.

“Given the recent recovery in oil prices, the industry is enjoying the flexibility of further accelerating fracking activity beyond current levels in the first half of the year. Such an acceleration could be delivered, as can be implied from the ratio of the current ‘live’ DUC inventory to the run rate of fracking, which is still in the six-to-eight-month range, compared to the normal level of about three months seen in 2018-2019,” says Artem Abramov, Head of Shale Research at Rystad Energy.

As of 21 January 2021, we identified 626 started frac operations in North America for December 2020 and we expect the month’s fact-based coverage to be almost complete. For January 2021, we project that there will be 830 wells fracked, the highest monthly total after March 2020, when the Covid-19 induced downturn began. Related: Why Gazprom Cut Gas Supply To Europe Amid Rising Prices

Back to DUCs, nearly all major oil regions followed the national trend in 2020, first exhibiting an unusual inventory build-up in the second quarter and then moving toward a gradual depletion in the second half of the year. The Permian Basin accounted for around 55% of the total horizontal ‘live’ oil DUC inventory as of December 2020, at around 1,900, and it accounted for a comparable share of the drawdown through the second half of the year, as the basin’s ‘live’ DUCs peaked at 2,400 wells in June 2020.

The magnitude of the anomaly in the inventory, accumulated through the second quarter, is now shrinking gradually, but it remains significant. Looking at the breakdown of the total DUC inventory by vintage, or the spud year, one can easily spot thick tails, or a slow depletion of 2019 and 2020 vintages. In particular, a significant number of wells spudded in the fourth quarter of 2019 and the first quarter of 2020 were subject to delayed completions, and many of them were still part of the inventory as of December 2020.

If we look at the 4Q19-1Q20 spud vintages combined, then, as of December 2020, 1,633 wells were still in inventory, with a 48% depletion from the level of 3,246 wells seen in April 2020. The eight-month depletion pace in the three previous years was normally observed in the 80-83% range. This implies that, as of today, there are still around 1,100 horizontal oil DUCs that would have been completed by now in a normal activity environment.

If a fracking increase materializes, DUC wells from 4Q19-1Q20 will be completed faster, but it will also require the industry to increase rig counts quicker to achieve a smoother transition from a DUC-driven activity phase to a normal operational mode. In other words, this scenario is possible, but it will require an increase in the reinvestment rates from what operators have currently budgeted for 2021.

Given the current environment of capital discipline and focus on free cash flow generation, we expect the industry to largely stick with its original fracking programs in the first half of the year, but probably allocate some additional capex to a more significant increase in the rig count. This will result in an upside in frac activity from the second half of the year, and certain deviations from the maintenance program will be visible toward the end of the year, assuming that WTI holds above the $50 per barrel mark.

By Rystad Energy

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • huy stu on January 25 2021 said:
    "Given the current environment of capital discipline and focus on free cash flow generation" - LOL - like that will ever happen.

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News