Houston —US unconventional oil production is forecast to increase to 7.522 million b/d in September, up 93,000 b/d from August, the US government said Monday - the smallest month-on-month growth projection since November 2017 when domestic oil prices were about 20% lower than today.
Last month, the US Energy Information Administration projected domestic oil output to grow in August by a relatively high 143,000 b/d.
"We more and more worry ...that production growth is slowing," EIA Senior Analyst Jozef Lieskovsky said.
On the other hand, the Permian's rig count rose by six last Friday to 485, Lieskovsky noted, indicating more activity. Still, "I think (growth is) constrained," he said,. citing tight takeaway capacity, particularly in the Permian Basin of West Texas and Southeast New Mexico.
Of all US basins, EIA projected the Permian to show the biggest monthly growth in September at 34,000 b/d, to 3.421 million b/d, although that is less than half the 73,000 b/d increase that was targeted for August, EIA said in its latest Drilling Productivity Report.
The Permian is the US' most active basin with nearly 500 rigs running as of Friday.
In addition, EIA expects the Eagle Ford Shale of South Texas to grow by 24,000 b/d to 1.448 million b/d in September. That is less than the 35,000 b/d of oil growth that the agency predicted last month.
EIA did increase its outlook for the Bakken Shale of North Dakota over last month, predicting 17,000 b/d of increased production for September, coming in at 1.314 b/d. That compares to 15,000 b/d EIA pegged for August.
Some E&P companies may be thinking that they should just stick to their original drilling programs set at the start of the year, and drill wells even amid tight takeaway capacity because they can simply "bank" the uncompleted wells and produce them when new pipelines come online late next year, Lieskovsky said.
JULY DUCs TOTALED 8,033
That seemed to be the case last month, when the US drilled-but-uncompleted well count, known informally as DUCs, passed the 8,000 mark in July at 8,033.
The Permian Basin's DUC count climbed to 3,470 in July, up by 167, slightly more than in June when DUCs rose by 162.
While the Eagle Ford DUC count rose by 32 to 1,512 in July, most of the basins saw single-digit DUC growth. However, the Niobrara's DUC count decreased by 40 to 432 and Appalachia's was reduced by five to 754.
DUCs are wells that were drilled but not produced for various reasons - timing, since wells are typically completed in batches now, or they are deliberately left unfinished, either to wait for higher prices or for lack of enough crews to complete them, or some other company-specific reason.
Lieskovsky cited oilfield service company statements in recent quarterly conference calls that they continue to use larger volumes of sand to fracture wells to get the oil out, and that this wears out equipment faster.
On the other hand, he did not think the slowed growth projection for September would necessarily endure for the rest of the year, pointing to the US DUC count that has steadily built in the last couple of years even when there were no takeaway capacity issues.
The number of domestic DUCs totaled 5,285 in November 2016, and has grown by over 50% since then.
CONSTRAINT MAY STEM FROM CREWS, EQUIPMENT
"The constraint could be due to not enough crews or equipment," Lieskovsky said.
During the recent round of quarterly calls, he noted, upstream companies all appeared to have worked out takeaway solutions while some that had the option, shifted some activity to other basins such as the Eagle Ford or Niobrara. In other words, producers did not appear to be worried by takeaway constraints.
Elsewhere in the seven major basins that produce sizeable amounts of oil, the Anadarko Basin in Oklahoma and the Texas Panhandle is projected to increase by 9,000 b/d of oil output to 558,000 b/d. And, the Niobrara Shale in Colorado is predicted at 5,000 b/d of oil production growth next month, to 615,000 b/d.
In the other two basins, Appalachia in Pennsylvania and Ohio should increase oil production in September by just 4,000 b/d to 123,000 b/d, while the Haynesville Shale in northwest Louisiana and east Texas is expected to remain flat in September month on month at 43,000 b/d.
Those two basins mostly produce natural gas.
