Why has the growth of U.S. oil production gone flat?

[dan_s]

EIA has no way of actually knowing what U.S. oil production is until they get the state reports. The most recent actual data we have is June. U.S. oil production has been flat since February.
February production was 9,075,000 bbls per day
June production was 9,097,000 bbls per day

Why?

As I've posted here and discussed in my newsletter and weekly podcasts, all of the early reports of U.S. oil production soaring past 10 million barrels per day were a gross exaggeration. Why?
> Oilfield service firms could not keep up
> Not enough midstream infrastructure
> The more U.S. oil production that's coming from the tight oil plays, the steeper the overall production decline curve.

From a Hart Energy report that I got this morning.

Additional evidence is found in the expanding lag for obtaining a frack spread, which grew from 60 days in second-quarter 2017 to 90 days as third-quarter 2017 got underway. Several stimulation providers reported being sold out for the remainder of 2017, and a few were scheduling work in 2018. The activity surge left stimulation crews with a substantial inventory of drilled but uncompleted wells (DUCs), sort of the 2017 iteration of an old challenge since rigs were generating new laterals faster than well stimulation providers could process.

DUCs rose by 900 wells in first-half 2017 to more than 6,000, according to the U.S. Energy Information Administration, even as completion crews and an extra 3 million hydraulic horsepower in stimulation capacity were eliminating the original DUC inventory from the 2014 downturn. Zipper fractures, a proxy for batch completions, grew to 75% of completion activity on average at mid-year and, in markets like the Permian and Bakken, topped 80% of well completions.

Those gains signaled that more wells were drilled on pads even as the number of wells per pad grew in stacked plays such as the Permian Basin. Crews were tied up at the well site for longer periods as they processed longer laterals, more stages and greater proppant loading, which is why demand for well stimulation will continue deep into firsthalf 2018 even as the industry adds capacity.


During the "rebound phase" of each oil cycle there is a surge of production, however it cannot by maintained at the initial pace.

Removing the "FEAR" of U.S. production growth would help raise oil prices.

PS: Frac sand demand will remain quite high. I see no evidence that upstream companies are going to cut back on the huge amounts of sand being used to complete horizontal wells.

[dan_s]

Richard Mason is chief technical director at Hart Energy:

Rig count: Tight formation horizontal rig count grew 22% to 28% per quarter after bottoming in mid-2016. That reflected nearly full utilization for super-specification pad-optimal rigs as the industry focused on full-field development. Rig count expansion was partially underwritten by hedging earlier in 2017 when commodity prices were north of $50. Several E&P companies began hedging again as pricing returned to $50 in third-quarter 2017 after a midyear drop.

However, the E&P sector gave mixed signals during second-quarter earnings calls when the group in aggregate announced more than $1.5 billion in reductions for domestic spending. Several E&P companies signaled intentions to reduce rig count as gains in cycle time enabled the sector to grow production at double-digit levels with fewer rigs.

For now, expect lower rig counts and higher demand for stimulation, at least in first-half 2018.


Think of it this way: Outside of the Tier One areas of the tight oil plays, well economics are not good. Outside of the Tier One areas, oil production is on steady decline. Global demand for oil is going up 1.5 million barrels per day year-after-year and there is NO WAY that the U.S. can meet that demand on its own. Heck, we cannot even meet our own demand. The U.S. still imports over 8 million barrels per day.