Enno Peters maintains a web site called Visualizing US Shale Oil Production. This is a wonderful resource for all those interested to understand the history and dynamic of US shale oil. This post is in two parts. It begins with a series of screen captures of Enno’s charts displaying production from the whole USA, the Permian, Eagle Ford, N Dakota (Bakken), Montana and Marcellus plays. Enno’s charts are interactive and readers are encouraged to visit his site to play.
Enno kindly sent me the data that underlies the charts and the second part of this post are a series of my own charts that interogates production, well numbers and decline rates. The legacy production, i.e. the underlying production without new additions, is declining at a rate of 38% per annum.
Let me begin with a brief clarification of nomenclature. Shale is a fine grained sedimentary rock made mainly of clay minerals. Most US shale oil in fact occurs in a wide range of lithologies including siltstones and carbonate rocks. This led to the re-naming of light tight oil (LTO) the tight referring to the low permeability that is characteristic of all such plays. But in this post I will simply use the popular term shale oil when referring to LTO.
I last visited the US shale oil statistics a year ago in: US Shale Oil: drilling productivity and decline rates
And so to the screen captures from Enno’s web site:
Figure 1 US shale oil production from North Dakota, Montana, Colorado, Texas, New Mexico and Pennsylvania estimated to represent over 90% of the US total. Each band represents wells brought on stream in individual years beginning in 2003. The curvature reflects the high decline rates. Production continued to rise to a peak of over 4 million barrels per day (Mbpd) in March 2015 for so long as production from new wells exceeded the decline in the underlying stack (Figure 12). In April 2015, 842 new wells were added and this was insufficient to cancel declines and production has been falling ever since (see below). Note that all pre-2010 production is contained in the narrow band at the bottom of the stack.
Figure 2 The Permian play does not produce glamorous initial production but has much lower decline rate making it the most popular and profitable play for companies to pursue in the downturn. At just below 1 Mbpd it is the third most prolific but perhaps the most resilient shale play in the USA.
Figure 3 The Eagle Ford provides the highest initial flow rates but also the highest declines. The former had made it a magnet for drilling, but now abandoned, production is in free fall. It remains the most prolific US shale oil play, but not for long as gravity is catching up.
Figure 4 North Dakota means the Bakken play. This is intermediate to the Permian and Eagle Ford. Decline has most definitely set in and is increasing.
Figure 5 Montana is also producing from the Bakken, but at 60,000 bpd it is a small bit player.
Figure 6 The Marcellus shale in Pennsylvania is a major shale gas play in the USA producing a small amount of associated liquids. At 14,000 bpd it is a teeny weeny bit player. But resilient. [note added 27th August: Ken Gregory in comments observes that this chart is actually for gas production from the Marcellus in MMcf/d and not for oil production at all. Please ignore the caption to Figure 6 🙁 ]
Figure 7 This chart mirrors Figure 1 up top showing total monthly US shale oil production. The steady rise since 2011 was eventually arrested by the oil price and drilling crash that began late 2014 with peak production just over 4 Mbpd in March 2015. The rig count peaked in October 2014 (Figure 9) and new well additions peaked in December 2014 (Figure 8). Therefore, it did not take long for the drilling slow down to show up in the production statistics. But the decline has been more gradual than many may have anticipated.
Figure 8 The number of new wells added per month peaked at 1113 in December 2014. Decline set in by April 2015 when 842 new wells were added. A year earlier, 800 wells / month was sufficient to maintain production growth the reason being that a year earlier production was about 1 Mbpd lower and absolute decline correspondingly less.
Figure 9 A major fly in the ointment for shale data interpretation is the loose correlation between rig count, drilling and the number of wells that are brought on line in any month. Compare figures 8 and 9. In general, shale wells have been drilled much faster than they have been fracked, completed and brought on line leading to a large backlog of drilled but uncompleted wells estimated at around 3,900 by Rystad Energy in May 2016. It is the rate of fracking and completions that determines new well additions, not drilling, for so long as the rig fleet is able to drill a surplus of wells.
Figure 10 The new production from new wells each month closely follows the pattern of new well additions (Figure 8). Note that first month production on average reflects only half a month and actual first month flows will be double that shown here.
Figure 11 The change in underlying production is deduced by deducting the new wells’ production from the total. Shale plays are characterised by high natural decline rates. Hence if one does nothing, production plummets. The system only survives by drilling lots and lots of new wells all the time. For so long as production from new wells exceeds the underlying production decline then total production will grow. Comparing this chart with Figure 10 you will see that the oil price and drilling crash has reduced the amount of new oil to below the level of decline replenishment as shown in Figure 12.
Figure 12 Deducting monthly underlying decline (Figure 11) from monthly new oil addition (Figure 10) provides this picture that shows how net additions transitioned to net subtractions. Net subtractions are running at about 50,000 bpd per month.
Figure 13 Converting the legacy decline (Figure 11) to a % of the total produces this picture of % decline rate per month. Multiplying the monthly figure by 12 provides an approximation of annual US shale underlying decline of about 38%. The chart shows that if anything, underlying decline is increasing with time.
DMR of North Dakota
OCD in New Mexico
BOGC of Montana
DEP of Pennsylvania
At the review stage (this morning) Enno pointed out that first calendar month production reflects on average just one half month since well additions will be spread across the month. This placed a question mark on some of my interpretations which were removed from the post at the last minute. This phenomenon is reflected in the data shown in Figure 10 and perhaps also 11 and 12.