The U.S. rig count continues to decline, but oil supplies aren’t in a “consistent decline,” in part, say analysts, because the number of wells drilled in the onshore is sharply higher than the number of wells awaiting completion.

Why fewer rigs but more output? It’s mostly because of drilled uncompleted wells and the decline in hydraulic fracturing, or “fracklog” in light, tight oil (LTO) plays, according to Rystad Energy. The “fracklog evolution” is evident in the three largest LTO plays: the Bakken and Eagle Ford shales and the Permian Basin. The trio accounted for close to 80% of LTO output growth in 2014.

Completions haven’t caught to drilling, plain and simple. And that means the market should be able to respond quickly when conditions are favorable.

“Last year, driven by expansion of tight formations in the Permian Basin, drillers outperformed completion crews by three horizontal wells per day on average,” Rystad’s researchers noted. “This has led to a significant accumulation of the fracklog, with an annual increase of 1,100 wells as of year-end.”

The decline in activity from October through February fell by almost 35%, which in turn caused a delayed response in fracking with a decline of less than 25% over the same period. “However, the decline accelerated in March and April 2015. As a result, the fracklog decreased by 200 wells in the first five months of 2015.”

The data demonstrate a “strong correlation between the number of fracked and started wells, as 80% of the wells come online within three weeks after completion,” Rystad noted. “Thus, massive well completion delays prevented aggressive fracklog reduction, but the number of fracked wells has been sufficient to balance base production decline to date.”

At the beginning of June, the scale of the fracklog in the three oil plays was “alarming, with 3,850 wells awaiting completion crews,” Rystad’s team estimated. Up to 35% of the wells on the books actually had been drilled more than five months earlier. “This number corresponds to seven-to-eight months of drilling at the current pace and indicates that the U.S. shale has sufficient inventory to restore growth when market conditions become favorable.”

To balance oil production declines from the horizontal wells in the Permian, Bakken and Eagle Ford, around 500 wells would need to be completed each month. Even if no more wells are drilled, the accumulated fracklog should be enough to maintain flat output until the end of the year. If the fracklog doesn’t change, about 360 horizontal rigs would be able to fill the gap, slightly above last week’s active drilling fleet of 352.

Of note, Baker Hughes Inc. in its U.S. rig count report on Friday (June 19) said one oil rig each were added in the Permian and Bakken this week. Also, count Cimarex Energy Co., Energen Corp. and Clayton Williams Energy Inc. among those willing to dip their drills into new Permian wells within the next couple of months (see Shale Daily, June 18; June 17).

Goldman Sachs analysts Damien Courvalin and Raquel Ohana said the U.S. rig count as of June 12 was implying an uptick in oil production of 145,000 b/d year/year in 4Q2015. They based the forecast on the rigs running in the Permian, Eagle Ford, Bakken and Niobrara formation. Last week marked the first time the vertical rig count had increased since Dec. 5, up three rigs, the duo noted.

Even if more rigs are dropped, Goldman sees producers picking up the pace. If West Texas Intermediate prices remain near $60/bbl, U.S. producers should continue to increase activity “given improved returns, with costs down nearly 30% and producers increasingly comfortable at the current costs/revenue/funding mix.”

The rig count as of last week was pointing to U.S. oil production declining sequentially between the second and third quarters, but only slightly. Production then was expected to continue to increase in 2016 by 180,000 b/d “at the current rig count under our well deferral scenario, which we view as likely given the observed rise in the well backlog,” Courvalin said.

“While we attempt to take into account the impact of increased productivity, factoring in that well productivity in the first half of 2015 is double its 2013-2014 trend, we see risk to our production modeling as skewed to the upside later this year should high grading become more apparent. Further, a rapid drawdown of the observed backlog of uncompleted wells could lead to higher production later this year and in 2016.”