Productivity gains boost new well performance, EIA says
David Wagman | January 24, 2020U.S. oil production from tight formations rose in 2019, and accounted for 64% of total U.S. crude oil production.
The share grew due to the increasing productivity of new wells that were brought online during 2019, according to the Energy Information Administration (EIA).
The growth in initial production rates have helped oil production from tight formations to increase despite slowdowns in drilling activity when oil prices fell between 2015 and 2016. Since 2017, recovering oil prices and more efficient production from new wells have helped producers cover costs of drilling, production and the development of new technologies.
The average new well produced more oil in 2019 than wells drilled in previous years, continuing a trend that has been observed for more than 10 years. EIA said that more effective drilling techniques, including the increasing prevalence of hydraulic fracturing and horizontal drilling, have helped to increase initial production rates. In particular, well productivity has improved because of the injection of more proppant during the hydraulic fracturing process and the ability to drill longer horizontal components (also known as laterals) and perforate more stages.
Increasing well productivity has supported crude oil production even in years when oil prices fell and rig counts dropped. In 2016, rig counts fell sharply, EIA said, and total U.S. crude oil production decreased for the first time in 10 years. Although fewer wells were drilled, those that were drilled were drilled more quickly and located in more productive areas, which led to increasing per-well production.
Oil patch shakeout
A report by a Dallas law firm said that the number of oil and gas company bankruptcies in the United States and Canada rose 50% in 2019 over the previous year. The number is likely to increase as declining energy prices continues to affect producers.
A total of 208 oil and gas production companies filed for bankruptcy between 2015 and 2019, according to the report. It said the increase in year-over-year filings indicates that the effects of the 2015 oil price crash will continue to be felt in the industry through at least the first half of 2020.
Also in January, oilfield services company McDermott International said it would file for Chapter 11 bankruptcy protection. The move would allow it to receive more than $2.8 billion in financing and shed $4.6 billion of debt. News reports said that most of the losses were attributed to delays in completing construction contracts for the Cameron LNG export terminal in Louisiana and the Freeport LNG export terminal in Texas.
Other losses were linked to a $6 billion deal in 2019 to buy engineering, procurement and construction company Chicago Bridge & Iron.
EIA said that oil producers have increasingly targeted the Permian region, which spans parts of western Texas and eastern New Mexico. The geological structure there is more complicated than in other regions, and it took producers more time to advance the drilling and completion technology.
Both total production and production per new well have increased in the Permian region for 13 consecutive years, EIA said. In four other regions, oil production fell from 2016 to 2017 due to low oil prices. In Eagle Ford, for example, oil production in 2019 was lower than its peak in 2015.