Rystad Energy believes the Permian basin will serve as the primary catalyst in restoring US onshore oil production growth by November.
The oil and gas consulting service bases the projection in part on its own data showing US Lower 48 oil production was 120,000 b/d higher in August than the US Energy Information Administration’s estimate in its Short-Term Energy Outlook for the month.
The higher production number coincides with increased drilling activity in the Permian, where 62 more rigs have started operations since May 27, according to data published Aug. 26 by Baker Hughes Inc. (OGJ Online, Aug. 26, 2016). The West Texas and southeastern New Mexico basin has accounted for more than two thirds of the entire US rig count increase during the country’s recent rebound.
Rystad notes the Permian’s current horizontal drilling activity is comparable to levels observed during the final three quarters of 2015. Additional completion work on drilled but uncompleted (DUC) wells also has been initiated.
Major operators in the Bakken and Eagle Ford, meanwhile, are yet to accelerate hydraulic fracturing work, with several companies saying a West Texas Intermediate price of $55-60/bbl is necessary for them to resume such activity. However, Rystad’s revisions do reflect decelerating declines outside the Permian.
The firm foresees continued upward revisions to EIA’s short-term US oil production outlook in the coming months, possibly slowing an oil-price recovery despite counter-seasonal global stock draws during the second and third quarters.
While the August STEO already includes an upward revision of 200,000-240,000 b/d for Lower 48 output during the fourth quarter, its current yearend projections are 450,000 b/d below Rystad’s base-case scenario.
Even with no shale well completions during September-December, Rystad projects Lower 48 production to exit the year at 6.07 million b/d, just 90,000 b/d fewer than the current STEO forecast. “Thus, further STEO upward revisions in the coming months are inevitable and the market should take notice,” the firm said.
Contact Matt Zborowski at [email protected].