In 2014 U.S. liquids production from shale and other tight plays in the Lower 48 rose by nearly 1.7 million barrels a day. In 2015 average growth had dropped to 1.16 million barrels a day, and so far this year, production is down by 150,000 barrels a day.
According to the analysts at Rystad Energy, U.S. production from horizontally drilled shale and tight oil plays stabilized at around 4 million barrels a day in the months of September and October. Including all sources, U.S. production is forecast to average 8.8 million barrels a day in 2016, down by 600,000 barrels a day compared with the 2015 average.
The Rystad Energy analysts noted that the number of new wells drilled in shale and tight oil plays dropped from nearly 21,500 in 2014 to 12,900 in 2015 and is likely to tumble to fewer than 6,500 new wells in 2016. Production declines lag:
The production, however, actually increased for another nine months after oil prices started to drop [in June 2014]. The lagged response in shale production, relative to the drop in oil prices and drilling activity (number of spudded wells), occurred because the number of completed wells did not start to fall until January 2015. The reasons that completion activity responded with a lag, include a logistical lead-time between drilling and completion, E&P companies’ annual budgets, contract commitments and the fact that drilling costs are sunk.
Regarding rig counts, Rystad’s analysts noted:
At the end of 2014, there was a requirement for 850-900 new wells per month in order to keep the production flat. The balancing number has decreased to 450 wells, due to improved well performances and natural deceleration of the base decline from already producing wells as a result of the drop in activity. In September/October 2016, the number of well start-ups has stabilized at the current balancing level of around 450 wells per month.
Finally, the analysts took a look at the activity in the Permian Basin’s Midland and Delaware plays:
The horizontal oil rig count has increased by 45% or 111 rigs from the low-point in May 2016 through end-October, driven almost entirely by the Permian Basin, where close to 70 rigs were added during this period. … We find that oil production growth from the Permian Delaware and Permian Midland plays has continued through the downturn. We also observe slower decline and stabilization in the other main shale oil plays, which also contributes to the stabilization of the total US shale oil production in the recent two months.
Rystad Energy has more details and charts at the company’s website.