US shale oil output estimated to see first drop in May: EIA
Houston (Platts)--13Apr2015/452 pm EDT/2052 GMT
US shale oil production is expected see its first net drop in May of
57,000 b/d, reversing a years-long trend of continued growth, according
to the US Energy Information Administration's latest Drilling
Productivity Report, which was published Monday.
The data show estimated net production in the Bakken, Eagle Ford and
Niobrara shale plays all dropping in May, as they did in April. But
April's estimates still showed a net growth of 1,000 b/d, EIA said.
May's estimates are the first time total net domestic shale oil output
will have contracted since the EIA began publishing the DPR in November
2013.
Among shale plays, only the Permian Basin in West Texas and New Mexico
is forecast to show a significant projected net gain in May -- of 11,000
b/d. That compares with 21,000 b/d net gain projected for the Permian in
April.
Because of low oil prices that have clung around the $50/b level for the
last several months, producers have steeply cut 2015 capital budgets and
shuttered drilling rigs. The result has been a relatively quick falloff
in new domestic production.
IA forecasts output from the Bakken Shale in North Dakota and Montana
will drop a net 23,000 b/d in May, compared with a fall of 8,000 b/d in
April, while the agency sees production from the Eagle Ford Shale in
South Texas slumping 33,000 b/d in May, compared with a 10,000 b/d drop
in April.
In addition, the Niobrara is expected to see a 14,000 b/d net decline,
versus a 5,000 b/d decrease in April.
The DPR uses recent data on the total number of drilling rigs in
operation, along with estimates of drilling productivity and projected
changes in production from existing oil and natural gas wells.
The projection is based on seven key shale plays: the Bakken; Eagle
Ford; Haynesville in Texas and Louisiana; the Marcellus, which is mostly
found in Pennsylvania; the Niobrara; the Permian Basin; and the Utica,
chiefly sited in Ohio. These plays accounted for 95% of US crude oil
production growth between 2011 and 2013.
The net gain in production is provided by subtracting legacy declines
from new production. Shale oil wells see a burst of output on completion
followed by a sharp rate of depletion over the first and second years of
production.
When drilling activity expands, new production rises faster than legacy
declines, resulting in net gains. However, as drilling activity, and
more specifically well completions, stall, new production plateaus and
then falls.
Legacy declines, based on the drilling of the previous 12-24 months,
continue to rise. These are forecast to total 343,000 b/d for May, a
record high, up from 335,000 b/d in April. At the same time, new
production should also tumble 15% between the two months, EIA believes,
forecasting new output of 286,000 b/d in May, compared with 336,000 b/d
in April.
As a result, legacy declines have now engulfed new production for the
first time. And it did not take long. EIA's forecasts for new production
began to slide in March at 399,000 b/d, down from 425,000 b/d in
February.
At the same time, EIA's weekly production forecasts are also beginning
to show signs of falling production. While the agency shows an estimated
8,000 b/d gain in US domestic crude oil output to 8.882 million b/d for
the week that ended April 3, it projected 8.874 million b/d of
production for the week ended March 27, which was down 37,000 b/d from
the previous week.
--Starr Spencer,
starr.spencer@platts.com
--Edited by Keiron Greenhalgh,
keiron.greenhalgh@platts.com
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