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Вторник, 25 сентября 2018 12:50

Rystad Energy: Exploration & Production Newsletter - September 2018 - eng

U.S. shale on track to deliver 1.5 million bbl/d oil growth in 2018

Tight oil production in the United States has been growing steadily over the past years, and the volumes from horizontal wells are projected to reach over 8 million bbl/d by the end of next year. This article examines the fundamental drivers behind this growth: well performance improvements and breakeven price trends, focusing on the top U.S. oil plays.

Figure 1 shows historical and forecasted U.S. light oil production from horizontal wells by month and life cycle. Reporting visibility is sufficient until June 2018, while production growth is estimated for the subsequent months based on expected well performance and drilling and completion activity trends. As of June 2018, U.S. shale light oil production has increased by 1.85 million bbl/d year-over-year. The current activity levels are sufficient to achieve additional growth of 0.5 million bbl/d between June and December 2018. Moreover, the current inventory of drilled uncompleted wells secures production growth through the end of the year, while strong contribution from new drilling is needed from the first half of 2019. The Permian Basin tight oil plays, both on the Delaware and Midland side, show the highest additions since 2016, while the more mature Bakken and Eagle Ford shale plays show stable production profiles. Total U.S. shale light oil production from horizontal wells is estimated to reach 8.3 million bbl/d by December 2019, 1.5 million bbl/d higher than the current level.

Figure 2 depicts the development in average 30-day production rate for horizontal wells during 2015-2018 for key U.S. shale basins: Bakken, Permian, Eagle Ford, DJ Basin, and Mid-Continent. The values are based on well-by-well reported production data, and thus the well results for 2018 are subject to change based on more production data becoming available as we progress through the year. Since 2015, we have seen a notable increase in well performance across all major shale plays. U.S. shale producers transitioned to drilling longer laterals, enhanced completion techniques (e.g. increased average proppant loading per perforated lateral foot) and focused more of the activity in the core areas of the acreage. In our selection, Bakken stands out as the play that exhibited the highest IP rates historically and so far in 2018. This year, preliminary figures point to an impressive gain in initial oil productivity. However, final productivity figures may be less dramatic, as results submitted by some operators could inflate the current estimate, and thus the average oil production rate could decrease as more operators report the data. Permian Basin also showed significant performance improvement over time. IP rate increased by an impressive 29% in 2016, outperforming Eagle Ford, and continued to increase by an average of 8% into 2018. It should also be noted that variation exists between Permian Midland and Delaware plays, with the latter exhibiting overall higher productivity results. 30-day oil IP rate in the Delaware is currently estimated at 891 bbl/d, compared to 786 bbl/d observed in the Midland. Productivity improvement in Eagle Ford has slowed down and keeps degrading from Q4 2017. 2018 production rate is estimated to average about 770 bbl/d, close to the performance observed last year. Preliminary well results in the DJ Basin also indicate degradation in well performance so far in the year. Mid-Continent similarly fails to deliver productivity improvements so far in 2018. However, current visibility might be insufficient to conclude on overall industry results. After an explosive initial learning period, no improvements have been observed in the basin in the last couple of years.

Figure 3 shows the distribution of WTI breakeven prices for all 2Q17-1Q18 horizontal oil completions for the major U.S. liquids plays. For these recent quarters, the number of unsuccessful and non-core completions is fairly significant, with around 20% of Permian and Bakken wells exhibiting WTI breakevens above $70 per barrel. Over a third of the wells in Mid-Con fall in this category. The DJ Basin Tight oil play shows the highest share of recent horizontal completions with breakevens below $40 per barrel (47%), followed by Eagle Ford shale (38%) and the Permian Basin (34%). The favourable economics of the DJ Basin are supported by high profitability of Anadarko’s, one of the top operators in the play, recent completions located in the core of part of the basin in Weld County. Although Bakken Shale has seen impressive well performance improvements over the last two years, this has come primarily as a result of larger, more intensive completions, with only 6% of recent completions breaking even at a WTI oil price of $30 per barrel. A typical U.S. unconventional horizontal well completed in the first quarter of 2018 exhibits a WTI breakeven of $47 per barrel. A typical well in Eagle Ford and Permian of the same vintage has an estimated breakeven of $44-45 per barrel, while the corresponding estimate for Mid-Con is around $56 per barrel.


Light oil production from U.S. shale plays has stayed resilient in the low-oil price environment, and having reached the bottom in 3Q 2016, has been on a clear growing trend since then. By the end of 2018, light oil supply in the U.S. is forecasted to reach 7 million bbl/d, expanding further to above 8 million bbl/d by the end of 2019. Impressive well performance improvements have been achieved during the last couple of years across all shale basins, with Bakken and Permian driving productivity additions this year amid estimated decline in other basins. At the same time, the number of non-core completions has increased in the period 2Q17-1Q18 for the major liquids plays. In Permian, 21% of all completions during that period had a breakeven price above $70 per barrel, while in the Mid-Con as much as 34% of all completions accounted for breakeven prices above $70 per barrel.

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