Drivers of U. S. Production | Russell T. Rudy Energy LLC
In a recent article in “Rigzone”, author John Kemp points out that rig count is at best an imperfect indicator of future production rates. He then goes on to enumerate the most important factors influencing them. However, he concludes that rig count is readily available and timely. The more sophisticated indicators are difficult to obtain, if at all; and if available, only after a significant lag.
We have already seen lower prices translate into reduced budgets and rig counts. There are varying opinions as to what production rates will be in 2015. In 2013 U. S. oil production increased by 790,000 barrels per day (bopd) and in 2014 by 1.28 million bopd. Some experts, such as the U. S. Energy Information Agency, foresee an increase in 2015 of 90,000 bopd, and most estimates are within +/-250,000 bopd of 2014 levels. Basically, the conventional wisdom is that 2015 production levels will be flat.
Kemp proceeds to enumerate what he considers the most important indicators of future oil production rates:
-Rig Count
-Time required to rig up, drill a well, rig down, and move to the next location
-Efficiency and capability of the rig (depth potential and horsepower)
-Vertical and horizontal depths of wells
-Time required to complete wells, once drilled
-Reservoir quality
-Number of frac stages required to complete a well (can vary from 10 to 30 or more)
-Initial production rates
-Decline rates
-Actual well head price relative to full life cycle breakeven cost of new wells.
All experts agree that production rate depends on much more than just rig count, and every well, every rig and every crew is different. However, determining the factors involved, and measuring them on a timely basis, is at best difficult. Consequently, some simplifications are necessary to do any analysis, and rig count is easy to obtain and relatively timely.
To read this article in its entirety, please go to www.rigzone.com/news/article_pf.asp?a_id=136944 .
