DUC's to the Rescue | Russell T. Rudy Energy LLC
Approximately one-third of the cost of an oil well is land acquisition and drilling costs. Drilling contracts typically are long term and involve stiff cancellation penalties. Contracts for completion services are of shorter duration and penalties less severe. Consequently, when oil prices started collapsing, shale operators used scarce capital to keep drilling but left the wells uncompleted. This “fraclog”, or inventory of drilled but uncompleted (DUC) wells continued to grow to the point that “World Oil” reports that it now includes 3,994 wells.
These DUC’s span the country from the Rio Grande to the Rockies, with the highest concentration in the Eagle Ford shale of South Texas. The U. S. Energy Information Administration predicts that domestic oil production will drop by 570,000 barrels of oil per day (bopd) this year. To offset this shortfall, it is estimated that operators can complete these DUC’s and release approximately 100,000 bopd to help offset the shortfall.
While this will not help struggling drilling contractors, it will enable operators like EOG, Chesapeake Energy, Anadarko and Exxon’s XTO unit offset lost production without having to drill new wells.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/01/07/shale-explorers-pump-oil-on-the-cheap-from-slumbering-us-wells .
