2023 was a big year for US tight oil production, particularly in the Permian Basin. It surpised lots of folks and the "buzz words" were the same hooey we've heard for 13 years... better technology and fewer rigs are producing more oil.
I don't buy it. Rigs drill holes in the ground, nothing more.
Approximately 24% of all tight oil wells drilled in the Permian in 2023 were longer than 11,000 feet (Enverus, etal).
In spite of these longer laterals, more densely spaced perforations stuffed with more dirt, liquids productivity has been going down over whatever time frame you wish, even, I am pretty sure, EUR's.
Because of new well design, cash-flow- at-all-costs production management practices, what use to be 53% first year decline rates in the Permian, are now 74%. The new stuff getting drilled in 2023 was going out the back door (as in declining) almost as fast as it was coming in the front.
Rig counts started down, seriously, in May. Frac spreads yo-yo'd but for the most part stayed pretty high and total completions in the Permian stayed high thru 3Q23. I don't think more wells were being drilled with fewer rigs; that was a dung heap. It was DUC's that caused the 2023 surpises and got everybody's panites in a bunch.
You may click the image(s) to enlarge it
This is a very cool chart. There is LOT to learn from this chart.
Notice how fast DUC's were deducted from inventory, YOY-3Q22 to 3Q2023. I estimate 525 DUC's were completed in the Perman Basin during that time frame and at 170,000 BO average recovery rate at month 12 (Novi, IHS) that would have added 244,520 BOPD to 2023 production growth.
East Daley Analytics forecasts Permian oil production exited the year at 6,185 Mb/d, up 560 Mb/d (10%) from YE22 production of 5,625 Mb/d and a record high.
In other words, almost half the astounding Permian growth in 2023... came from DUC's and did not have dog dookey to do with technology or greater rig efficiencies. Thats really dumb...like this article from oilprice.com:
In the Novi DUC chart above, notice how steep DUC decline was in core counties I have identified from 3Q22 to 3Q23.
Notice how little decline in DUC's there were, for instance in Reeves. Reagan, Upton and Ward counties. Those are core counties in both sub basins. The number of DUC's in those core counties has been consistent for years, even in 2021 when oil was pushing $95 and natgas was $6. In 2023 the average price of oil was over $70. Those DUC's are dead DUC's.
Notice how many DUC's there are in the goat pasture outside the core areas. Notice how many DUC's there are on the Central Platform, which are likely in short-lateral conventional benches. Those DUC's need $120/$6, sustained. If a DUC was a source of immediate cash flow it would have been completed by now, guaronteeeeed.
Whats the point?
Affordable, profitable DUC's that could be completed and that might account for half of Permian Basin growth in 2024 and outbound years, are gone. Liquids productivity is falling as pressure depletion sets in and gassy oil wells become oily gas wells. Decline rates are increasing. EUR's are going down, Highgraded core areas don't have much more room for 15,000 foot laterals. Economics are marginal, at best, with sub $2 natural gas prices. If there were thousands of Grade A, Primo, Tier 1 & 2 locations left in the Permian why are they effectively paying $4 MM per new drilling location in M&A's?
Don't expect a lot more suprises to the upside anymore.
The heart of the Permian Basin watermelon has been chomped.