Tide is turning23 Oct 2021 19:45
U.S. exploration and production (E&P) companies are completing wells at record rates, outpacing new wells by nearly 250 a month, according to Raymond James & Associates Inc.
Analyst John Freeman in a note to clients Monday said the domestic count of drilled but uncompleted wells, aka DUCs, has dropped by nearly 3,300 from nearly 9,000 strong in July 2020.
In the “largest (and quickest) drawdown to date,” the current DUC inventory is crossing the critical “normal level,” Freeman said. “Over the last year, completions have outpaced new drills by nearly 250 wells/month, an unsustainable delta of which has never occurred.”
E&Ps since July 2020 have maintained production levels mostly “by tapping their vast supply of DUCs, opting to forego costlier new drills in favor of cheaper completions.”
For production levels to sustain current rates — not grow — there has to be “a substantial influx in rigs, and therefore new drills are needed,” he wrote. “Operators must devote additional capital toward new drills (soon) or risk a slow, but sure, decline in production.”
The U.S. Energy Information Administration (EIA) every month provides data on the DUC count across the Lower 48 in the Drilling Productivity Report. The DUC count for August was down in every region month/month, with the total declining by 248 to end at 5,713.
The count “has experienced Dr. Jekyll and Mr. Hyde-like fluctuations, both positive and negative,” Freeman said. “The EIA date can best be described as a towering, high-speed roller coaster, gradually climbing from August 2018 to June 2020 before plummeting in just 14 months time.”
It took nearly 38 months to add 3,300 DUCs, from June 2017 to July 2020, Freeman said. However, it took only 14 months, from July 2020 to August 2021, to return to the June 2017 total of 5,700.
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