U.S. oil and gas producers have held the line on capital spending and concentrated on completing wells rather than costly new development, the Energy Information Administration (EIA) said. 

US Duc inventory

The EIA’s Drilling Productivity Report (DPR) issued earlier this month noted that the backlog of drilled but uncompleted wells, aka DUCs, had declined in May by 247 from April across the Lower 48’s major oil and gas basins. 

Researchers estimated that, as of the start of June, there were around 6,521 DUCs in the seven major tight oil and shale natural gas basins. The Lower 48 inventory “peaked at 8,874 DUCs in June 2020” amid the pandemic-related downturn in commodity prices and demand.

“Nearly 40% of DUCs (or 2,616 DUCs) are in the Permian Basin,” said EIA researchers. Principal contributors to the analysis were EIA’s Christopher Peterson and Jozef Lieskovksy.

From June 2020 through May, the uncompleted well count has slipped by 27%, to 2,353. 

“Since the Covid-19 pandemic began, E&P companies have cut capital expenditures, deployed fewer rigs, and reduced oil and natural gas production in response to lower demand and lower prices,” said researchers. “DUCs help operators produce oil and natural gas at a lower cost.”

The Permian, which stretches across West Texas and southeastern New Mexico, had 115 wells completed month/month to end May at 2,216. The Eagle Ford Shale had the second largest number of DUCs, ending May at 1,040, which was 31 fewer than in April.

The Anadarko Basin, which has seen a recent spurt of activity, saw its uncompleted well count fall from April by 19 to 861. The Bakken Shale DUCs declined by 27 to end May at 636. 

In the natural gas-rich Appalachia, the DUC count was down by 13 to end May at 577. One more well was completed in the gassy Haynesville Shale, with 384 still unfinished at the end of May. Meanwhile, the Niobrara formation of Colorado saw 41 wells removed from the DUC count to end May at 407 still awaiting completion.

EIA estimates DUCs by examining the difference between records of drilled wells and completed wells each month. The difference equals the net change in the inventory, or well count. In general, most DUCs are completed and begin producing within one year after they are drilled. 

A small decline in the oil patch and a small gain in natural gas-directed drilling left the combined U.S. rig count unchanged at 470 for the week ended June 25, according to the latest figures from oilfield services provider Baker Hughes Co. (BKR).

There were 265 U.S. rigs running onshore and in the Gulf of Mexico combined in the year-ago period, according to the BKR numbers, which are based partly on data from Enverus. More than 100 rigs have been added domestically since the start of the year, data showed.

The number of fracture spreads also is climbing, based on data from Primary Vision. The consultant’s latest Frac Insights report issued last Friday indicated domestic well completions ended at 235 active spreads. 

More activity is predicted in the onshore as development picks up in basins beyond the Permian, according to Prime Vision. Activity is believed to be accelerating in the Williston Basin, along the western Gulf Coast and in “some of the fringe basins”. The Anadarko “will also attract activity” as natural gas liquids pricing, exports and storage increase.

“The pace of rigs (which already has begun) will accelerate in July as DUCs are replenished or at least held constant after working through inventory over the last year or so,” Primary Vision’s team said. 

“The Permian will see some additional activity over the next four-to-six weeks, but we are getting close to full utilization in the region and to bring back other spreads will require a higher price and time to repair/replace equipment and hire new labor. The trend of additions will be higher, but the pace of additions will be slower — especially when compared to rigs.”