AlwaysFree: U.S. Energy Information Administration - This Week in Petroleum, Release Date May 17, 2023

According to the U.S. Energy Information Administration website news article published on May 17, 2023:

EIA revises estimate of drilled and completed wells in the Permian region

In the monthly Drilling Productivity Report (DPR), EIA estimate the number of wells in seven major U.S. oil and natural gas producing regions across three categories: wells drilled and wells completed, with the remainder being wells drilled but uncompleted (DUC). EIA determine well completions based on weekly filings reported to FracFocus. Submissions usually lag by several weeks, so EIA forecast recent completions using modeled estimates and analyst judgment. Based on industry and trade press reports indicating completion crews moved from other natural gas regions to the Permian region, EIA increased the estimate for monthly well completions in the Permian region and decreased the estimate of DUC wells from the March DPR in the April DPR. After the April DPR release, FracFocus reported an unusually large number of well completions in the Permian region because some operators submitted several years’ worth of unreported completions. This revision affects not only the estimate of completed wells but also the number of drilled wells because it implies more available wells for completion. These changes also increased the estimate of DUC wells in the Permian region in the May DPR, nearly reversing the changes made in the April DPR.

In the April DPR, EIA estimated that 5,328 wells were completed in the Permian region in 2022, averaging more than 440 wells per month. In the first quarter of 2023, EIA estimated the pace increased to average more than 460 wells completed per month. In mid-April, however, operators submitted a total of more than 1,100 Permian well completions during a single week to FracFocus. Normally, operators in the Permian region submit about 100 wells each week, although weekly submissions can range between 30 to more than 200 wells. This submission was not an error. It represented more than two years of late completion filings. The bulk of these completions occurred in 2022, leading us to revise up 2022 monthly completions by more than 50 wells in some months from the April DPR to the May DPR. Ultimately, EIA increased the estimate of 2022 well completions in the Permian region to 5,704 wells, averaging 475 wells completed each month (Figure 1). EIA will continue to make revisions in future DPR releases as warranted following incoming FracFocus submissions.

Unlike for well completion filings, EIA determines the number of wells drilled each month by estimating the productivity of the active oil rig fleet. Small changes in estimated productivity can have a large effect on the number of wells EIA estimates were drilled. In previous DPRs, EIA assumed the average oil rig in the Permian region in 2022 could drill about 1.2 wells per rig-month (the monthly average rigs reported from Baker Hughes). The revision in well completion filings from FracFocus indicated a substantial revision in the number of drilled wells available for completion, which implies rig productivity had been higher than the estimates.

As a result, EIA revised the estimates for the number of drilled wells by using a higher rig efficiency of slightly more than 1.3 wells per rig-month. EIA did not change the active oil rig count, which EIA collects from Baker Hughes, but EIA changed how many total wells each rig can drill per month. Because this information is inherently uncertain, EIA relies on analyst judgment, industry estimates, trade press reports, and modeled trends to estimate the rig efficiency.

the revised productivity per rig increased the number of drilled wells EIA estimated in the Permian region. In the April DPR, EIA estimated operators drilled 4,813 wells in 2022, averaging 401 wells per month. In the May DPR, EIA now estimates operators drilled 5,264 wells in 2022, averaging 439 wells per month (Figure 2). EIA now believe that active drilling rigs were about 10% more productive in 2021–2022 than EIA had estimated.

Because EIA determines the estimate of DUC wells by subtracting the number of wells completed each month from the total number of wells drilled, the revisions to both the number of wells drilled and number of wells completed also affect the Permian DUC well count. Even though the direction and magnitude of the changes to the estimates of drilled wells and completed wells were similar, the cumulative effects of revisions to more drilled wells compared with completed wells throughout 2022 increased the DUC well estimate compared with the April DPR (Figure 3). In the May DPR, EIA estimated that Permian DUC wells ended 2022 with 1,069 wells, revised up from 843 wells in the April DPR. As of April 2023, EIA estimated 910 DUC wells are in the Permian region. Had EIA only revised well completions following the new FracFocus submissions, the estimate of the DUC well count would be less than zero, making the revision to drilled wells necessary and warranting a higher rig productivity estimate.

Although EIA revised well counts in the Permian region, this process has not affected the historical estimated crude oil production in the region because operators had already submitted their crude oil production to the states. EIA surveys oil production by state in the EIA-914 survey and publish estimated state and national totals on Monthly Crude Oil and Natural Gas Production page. Even though EIA may revise region-level estimates in the DPR each month, the changes to annual averages tend to be small and must be consistent with the state-level data published in the EIA-914 survey. Despite changes to the well counts, EIA have not changed the 2022 Permian crude oil production estimates, and in both the April and May DPR, EIA estimated 2022 Permian crude oil production averaged 5.3 million barrels per day.

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