Fraclog Economics | Russell T. Rudy Energy LLC
Given the recent recovery of crude oil prices, many industry observers are speculating what level will stimulate domestic production. This is especially relevant given the large inventory of drilled but uncompleted (DUC) wells in the U. S. A recent article in “World Oil” cites a study by the consultants at Rystad Energy of incremental completion costs to bring these “fraclog” wells on line.
Rystad calculated average completion costs per barrel of reserves in the Bakken, Eagle Ford, Niobrara, and Permian shales (the Delaware and Midland Basins in the Permian were considered separately). Results were aggregated and sorted by county. Weld County in the heart of the DJ (Denver-Julesburg) Basin of Northern Colorado had the lowest completion costs per barrel at $4.70, and the most DUC wells with almost 600. Almost half of these wells are operated by Anadarko, PDC Energy, Noble Energy, and Whiting Petroleum, each with about 10% of the total.
The article includes an excellent bar graph listing counties in ascending order according to completion costs and is color-coded by shale play. Reeves County, Texas, in the Delaware portion of the Permian Basin of West Texas had an average completion cost per barrel of $4.80. Mackenzie County, North Dakota, in the Bakken came in third at $5.10.
Interestingly, of the 20 counties with the lowest completion costs per barrel, Weld County was the only one in the Niobrara. There were 6 counties each in the Eagle Ford of South Texas and the Midland portion of the Permian. 5 counties in the Bakken and 2 in the Delaware play made the list. The article concludes that a major portion of the DUC inventory is commercial in the current price environment.
With an estimated 3,500 wells in the “fraclog” representing possibly 300,000 barrels per day of incremental production, this could significantly increase domestic supply, but imperil price recovery.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/5/25/dj-basin-beats-bakken-permian-eagle-ford-on-commerciality-of-fraclog .
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