Gas Compression Magazine

October 2016

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I n September, the US Energy Information Administration (EIA) began offering a supplement to its monthly Drilling Pro- ductivity Report (DPR) that provides monthly estimates of the number of drilled but uncompleted wells (DUCs). The DUC information aligns with its DPR and provides data on seven shale resources in the US – Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian, and Utica. While shale resources and production are found in many US regions, the EIA is focusing on the seven most prolific areas. According to the EIA, these regions alone accounted for 92% of domestic oil production growth and all domestic natural gas production growth during 2011-14. DUC estimates will be based on the month prior. For example, the September DPR includes DUC estimates through August. The EIA defines DUCs as wells that have been drilled by pro- ducers, but have not yet been made ready for production. The full completion process involves casing, cementing, perforating, hydraulic fracturing, and other procedures to make the well ready to begin producing oil or natural gas. The EIA reports that, following the large decline in oil prices since mid-2014, new drilling and completion activity slowed, and the number of DUCs increased. A high inventory of DUCs has implications for the size and timing of the do- mestic supply response to changes in oil prices, with or with- out significant changes in the number of active drilling rigs. Although both drilling and completion activity have declined since late 2014, completions have experienced a deeper decline than drilling. According to the EIA, the differences in drilling and completion rates in these regions may be attributed to sev- eral factors. For example, some long-term contracts for drill- ing rigs and lease contracts may mandate drilling or producing in order to fulfill commitments made to the landowners and mineral-right owners. Estimates of the number of DUCs have been available from other sources. These estimates can vary significantly because of differences in methodology and operational assumptions, or, in some cases, insufficient data. With the EIA now reporting the data, we can expect consistent methodology and reporting, adding another arrow to the market-indicator quiver. The DPR uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells to provide estimated changes in oil and natural gas production for seven key regions. It's important to note that the EIA does not distinguish between oil-directed rigs and gas- directed rigs because once a well is completed it may produce both oil and gas. According to EIA data, more than half of the wells produce both. In its first DUC report, EIA estimates show DUC counts as of the end of August totaling 4117 in the four oil-dominant regions (Bakken, Eagle Ford, Niobrara, and Permian) and 914 in the three natural gas-dominant regions (Haynesville, Marcellus, and Utica) that together account for nearly all US tight oil and shale gas production. Counting DuCs HAigHt REPoRt BREnt HAigHt, PuBlisHER bhaight@thirdcoastpublishing.net gascompressionmagazine.com | oCtoBER 2016 46

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