New Study: US Shale Productivity Will Offset Rising Service Costs

Topics: Petroleum economics/production forecasting
Source: PetroNerds/DrillingInfo Data
Annual Permian Basin decline curves of horizontal wells show that well productivity improvements accelerated substantially during the worst period of the industry downturn.

Though crude prices are rising, US shale producers face questions over whether their improving oil production results and cost efficiencies will last as increasing drilling activity drives demand for oilfield services. Countering a raft of negative outlooks, a new study argues that the unconventional sector has reason to be optimistic about the months and years ahead.

Thanks to a greater understanding of geology and improved technology application, the new generation of horizontal wells completed during the downturn are outperforming their predecessors by wide and growing margins, according to the study published by the Oxford Institute for Energy Studies in November, “Unravelling the US Shale Productivity Gains.”

The bottom line, as this study sees it, is that the well productivity and efficiency benchmarks established over the past 2 years represent sustainable progress that cannot be wholly attributed to high-grading programs or service sector price concessions. The expectation is that many operators will be able to offset the approaching financial headwinds with higher producing wells.

These conclusions are based on the performance of operators in several key shale plays where not only are initial production rates improving—an early measure of success—but so are two other important performance indicators: higher cumulative production and slower decline rates.

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New Study: US Shale Productivity Will Offset Rising Service Costs

Trent Jacobs, JPT Senior Technology Writer

21 December 2016

Volume: 69 | Issue: 2