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An Imminent Threat For Oil Prices? DUC Count: 5031 And Counting

The total number of DUCs is declining, but remains elevated

Along with its monthly Drilling Productivity Report (DPR), the EIA released a supplement today which estimates the number of drilled uncompleted wells (DUCs) in the seven key oil and natural gas producing regions covered by the agency’s broader drilling report. The number of DUCs has been declining over the past few months, but it remains well above levels seen prior to the late-2014 price crash.

Current EIA estimates show DUC counts as of the end of August totaling 4,117 in the four oil-dominant regions and 914 in the 3 gas-dominant regions that together account for nearly all U.S. tight oil and shale gas production. In the oil regions, the estimated DUC count increased during 2014-15, but declined by about 400 over the last 5 months. The DUC count in the gas regions has generally been in decline since December 2013.

(Click to enlarge)

While both drilling and completion activity have declined since late 2014, completions have experienced a deeper decline than drilling in the four DPR regions (Bakken, Niobrara, Permian, and Eagle Ford) that account for nearly all tight oil production, resulting in a growing inventory of DUCs.

The differential reduction in drilling and completion rates in these regions may be attributed to several factors, including long-term contracts for drilling rigs and lease contracts that mandate drilling and/or production in order to fulfill commitments made to the landowners and mineral-rights owners. Related: Lack Of Pipelines Continues To Dog Canada’s Oil Industry

The situation appears to be somewhat different in the other three DPR regions (Marcellus, Utica, and Haynesville) where the production mix skews heavily towards natural gas, in which significant price declines began as early as 2012.

Near term contracts for West Texas Intermediate crude oil traded above $46/barrel today. Natural gas traded above $2.90 per Mcf.

By Oil & Gas 360

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  • Kr55 on September 18 2016 said:
    A deeper dive is needed to see what the threat really is. Many DUCs are in very low quality locations. back when oil was $100+ every location could make a bit of money, but when prices dropped large areas became basically garbage and many drilled wells have been and will continue to sit until prices go up dramatically.

    I did see a charge of DUC's per region and the Eagle Ford DUC's have fallen quite a bit, probably most of the high quality locations that could make money around $50 were fracked recently and the junk will continue to sit. As we have seen though, the large number of DUC's fracked and completed were not enough to stop the Eagle Ford declines.
  • David Williams on September 21 2016 said:
    In my opinion, most of the DUCs are just holes in the ground drilled to increase the borrowing power of under financed producers. Most of these holes in the ground are worthless. For this reasons and other reasons, EIA denies any responsibility for their reports. It's buyer beware! How can you trust a report you can not verify? Anyone can stuff some cash in an envelope and approach the EIA. My guess is they would get the favor they wanted if the envelope was fat enough.

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