Kemp: Shale Producers Postpone Oil Well Completions

Reuters via Rig Zone ^ | February 20, 2015 | John Kemp

[thackney]

EOG Resources became the latest major shale producer to state that it would "delay a significant number of completions" when it announced fourth-quarter results.

The company plans to end 2015 with 285 wells awaiting completion services, up from 200 at the end of 2014, it told investors during an earnings call on Thursday.

Continental Resources has also announced plans to go slow on well completions in response to the slump in oil prices.

Apache and Anadarko Petroleum are among other shale producers to announce a deliberate strategy of delaying completions.

U.S. shale producers are postponing well completions to conserve cash and defer production until prices recover.

There are a large number of wells that have been drilled but are awaiting the arrival of pressure pumping crews to fracture them and service companies to link them up to gathering pipelines.

In North Dakota, there were an estimated 750 wells that had been drilled but not yet completed at the end of December, according to the state's Department of Mineral Resources.

Once these wells are completed, they will increase the number of producing wells in the state by more than 8 percent, from the current total of around 8,950.

At recent completion rates, it would take another 3-4 months to clear the backlog even if no new wells were drilled in the meantime.

Similar backlogs have emerged in the other shale plays. They have been a source of frustration for producers and mineral rights owners waiting for the oil to begin flowing and royalty payments to start arriving.

For the most part, delays in completing wells arose inadvertently as drilling outpaced completions during the frenzied drilling boom in the first eight months of 2014.

But now some exploration and production companies are deliberately postponing completions to improve their financial performance....

[ckilmer]

this means that they can pretty quickly ramp up production once prices improve.

[arthurus]

Government acknowledged inflation has been slowing. Real inflation's rise has been slowed. The increase in the rate has slowed but the level of inflation is still rising albeit more slowly. The general price rise has a long way to go but won't be the smooth rise of the past. So long as the stock market continues to rise the prices on the street will continue to rise more slowly but still rather faster than the official half percent. When the stock market crashes general prices will commence to rise rapidly. Most of the new created money went into the stock market. That is why it keeps going up even as the economy languishes. The money went to the banks who couldn't lend it profitably so it got diverted into the Market.
Emotionally I watch NYSE just climb and climb and I want it to fall because people think we must be economically in good shape because of the continual rise. In my head though, I know that it must keep rising if my dollars are to continue to be useful.

[arthurus]

Dismantling the big unions is a plus for the economy. Meanwhile they and their strikes provide those signs of continuing inflation. I repeat, and Sowell and von Mises and Friedman all agree, that in an inflation wages are the prices that rises last. Throughout the 90s there was effectively a gentle deflation- prices continually declined as the production of goods and services rose at a higher rate than the money supply. There were not strikes beyond one or two at companies that themselves were in trouble. Wages did not increase much in nominal terms but earners were not stressed. Their money seemed to go a bit farther over time. They did not strike.

[thackney]

You only hold a lease with production, not an incomplete well.

[jimt]

I always appreciate your fact filled energy posts. Thanks !

[conservatism_IS_compassion]

I always appreciate your fact filled energy posts. Thanks !

Second.

[ROCKLOBSTER]

Striking workers ..."enemies domestic"

[conservatism_IS_compassion]

In my view fracking can shut down due to low prices, and it can start right up again when prices go up. It’s a technology that is well proven, and will be employed whenever the financials are adequate.

That’s fine as far as it goes - but it entails the cost of training up new workers to replace those who move on because they can’t just get in a can and wait for the industry to pop the lid off again when prices are right. Just naturally raises costs. There are good counter arguments, but I’m still not convinced that we shouldn’t impose a protective tariff on oil. Not a huge one, of course - just enough to put a thumb on the scales in favor of domestic production. Thereby cushioning the notorious swings the fuel market is subject to. That might also, tangentially, improve the market for NG. But thackney points out that some of our refining capacity is best suited for imported oil. Clearly that would place a hardship on people who don’t deserve it.

[thackney]

I’m still not convinced that we shouldn’t impose a protective tariff on oil.

- - -

I’m 100% convinced we should not. Do not have the feds pick winners and losers in private industry. We need our refineries and petrochemical industries just as much.