More With Less | Russell T. Rudy Energy LLC
Oil rig counts and capital budgets have always been a leading indicator of production levels. While this is still true, a recent article in “World Oil “ contends that the correlation might be changing. The U. S. oil rig count has dropped 59% from its peak last year, but production has fallen only 5%.
This disconnect is partly attributable to an increase in drilling efficiency born of desperation. Operators are learning to drill more wells in less time. Allen Gilmer of Drilling Info observes that as rig counts were dropping, oil companies were high grading prospects and drilling longer laterals (the horizontal portions of wells), thereby draining more acreage with fewer well bores.
Unfortunately, this increased efficiency is helping prolong the oil glut and low prices. In the Permian Basin of West Texas and Southeastern New Mexico, oil production is actually expected to rise to 2.02 million barrels of oil per day (bopd) next month. In North Dakota’s Bakken shale, output is expected to decline only 6.4% from its December peak to 1.18 million bopd. In the Eagle Ford shale of South Texas production is expected to drop to 1.42 million bopd, a 17% decrease from the March high, but still not commensurate with the decrease in rig count.
While the downturn in the oil industry has been painful, the increased efficiency will only enhance profitability when prices recover. Gilmer concludes that “When oil was $100, you did not have to be good, you just had to be there.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/9/15/shale-drillers-pump-more-oil-from-each-well-as-rigs-mean-less .
