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EIA, Analyst: US Crude Production Strong, Despite Rig Count Decline
Rig Zone ^ | December 18, 2014 | Gene Lockard

Posted on 12/19/2014 5:05:37 AM PST by thackney

Rig counts have trended lower in recent weeks, and the drop is right on schedule, according to online economic blog Zero Hedge. There is a lag time of about four to six months before initial declines in crude oil prices lead to a reduction in rig counts, and it’s been about that long since crude oil prices began sliding last summer. But while analysts acknowledge the reduction in rigs, they say production levels will continue to grow, though not as quickly.

There can be a reduction of as much as 10 to 25 percent in the number of wells without making a large difference in production, Berkeley Research Group Managing Director Rick Chamberlin told Rigzone.

“Production will continue to grow, but it just won’t grow at the same rate,” Chamberlain said, adding that until the Organization of the Petroleum Exporting Countries (OPEC) agrees to lower production values, U.S. crude oil producers will start ”focusing on the sweet spots” – the most productive areas of the shale formations they are drilling in. They will also try to maximize efficiencies – essentially, to get more bang for the buck – by optimizing wells on a cost/return basis, such as having fewer completions on a lateral, he said.

New wells are projected to produce an average of 3 more barrels of oil per day in January 2015 than in December 2014, according to the Energy Information Administration (EIA) in its Dec. 8 Drilling Productivity Report. Output is also expected to increase “to the highest level since 1972.”

The Bakken, Eagle Ford, Permian, Niobrara and Utica formations are all expected to yield a new-well oil production figure in January, 2015 that is 5-8 barrels of oil per day higher than the expected December 2014 figures, according to the EIA’s report.

A drop in production values is considered unlikely unless the oil price slide is lengthy, the Energy Collective said.

While crude oil prices have weakened considerably, the price slide is unlikely to be protracted, Chamberlain said.

“I don’t think prices were expected to drop as quickly or as much as they did; the [OPEC countries] may have overshot the mark. I expect them to cut production soon to increase prices.”

Earlier in December, the rig count in the Permian Basin fell by 20 to 548 operating rigs, Zero Hedge said. Elsewhere in the United States, the rig count fell by nine, resulting in a total rig count drop of 29 in one week. It was the worst week for rig counts since March, 2013, Zero Hedge noted, and the third-most in the last five years.


TOPICS: News/Current Events
KEYWORDS: energy; oil
“Production will continue to grow, but it just won’t grow at the same rate,”
1 posted on 12/19/2014 5:05:37 AM PST by thackney
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To: thackney

There is an oil field near my office with at least a dozen rigs. Yesterday only one of them was pumping. Enjoy your low price gas. The situation is temporary.


2 posted on 12/19/2014 5:25:33 AM PST by P-Marlowe (Saying that ISIL is not Islamic is like saying Obama is not an Idiot.)
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To: P-Marlowe

Older wells often have to cycle on-off. Low flow condition mean the pumps cannot run continuous or the water draw will be too great.


3 posted on 12/19/2014 5:28:54 AM PST by thackney (life is fragile, handle with prayer.)
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To: P-Marlowe
BTW, a rig is not a pump.

This is a rig.

This is a pump.


4 posted on 12/19/2014 5:31:29 AM PST by thackney (life is fragile, handle with prayer.)
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To: thackney

Thanks for the post. Good news.


5 posted on 12/19/2014 5:45:50 AM PST by Obadiah (If the RINOs engineer the 2016 Primary for their guy, I will sit out the General for my guy.)
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To: thackney

Most of the “pumps” are down now. When the price was $100 a barrel, most of them were running.


6 posted on 12/19/2014 5:50:39 AM PST by P-Marlowe (Saying that ISIL is not Islamic is like saying Obama is not an Idiot.)
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To: P-Marlowe

Looks like I’m stuck with CRK in my 401k for longer than I originally thought. Lol


7 posted on 12/19/2014 6:21:58 AM PST by Night Hides Not (Remember the Alamo! Remember Goliad! Remember Mississippi!)
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To: Night Hides Not

My 401k lost 2% on Monday.

It is all back and more as of yesterday.

Low gas prices are bad for oil stocks but great for transportation stocks. The cost of goods and services drops when gas prices drop. In the end it is a wash.


8 posted on 12/19/2014 6:42:12 AM PST by P-Marlowe (Saying that ISIL is not Islamic is like saying Obama is not an Idiot.)
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To: P-Marlowe

Hauling off the salt water gets to be more expensive than the revenue from the oil they produce. The more salt water per bbl they produce the sooner the salt water disposal cost exceeds the oil revenue. Eventually, the operator just runs the well enough each month to make a showing so he can hold the lease until things get better and he can afford to pump oil. The abandonment cost is so high they keep the wells limping along for as long as they can while they try to figure out how to get rid of them and make the abandonment someone else’s problem.

These stripper wells don’t make a whole lot of oil per each but there are a whole lot of them.

BTW, this article is mostly bull. For each rig that continues to run production will either remain the same for the wells that rig drills if it has reached plateau or slightly increase if it has not reached plateau. For each rig that goes down the rate from the sum of the wells it has drilled will decline at about 70% per year or so... very rough numbers each well is different and your mileage may vary. So, overall production will fall by 0.7 x 0.x (percent of rigs reduced). I expect that 20 to 50% of the rigs will be laid down by March if this price continues.... within 6 to 12 months production from shale will fall by about 14 to 35%. It is fun to bet with so little consequence isn’t it.


9 posted on 12/19/2014 7:48:26 AM PST by Sequoyah101 (Adversity does not build character so much as expose it.)
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