London (Platts)--9Mar2015/420 pm EDT/2020 GMT
US shale oil production is expected to see a net gain of just
1,000 b/d in April, according to the US Energy Information
Administration's latest Drilling Productivity Report published
Monday.
The data shows net production from the Bakken, Eagle Ford and
Niobrara shale plays all falling in April -- the first time they
will have contracted since the EIA started publishing the DPR in
November 2013.
Only the Permian region will show a significant projected net
gain in April, at 21,000 b/d, compared with the February
report's projection for March growth of 30,000 b/d.
The DPR uses recent data on the total number of drilling rigs in
operation, along with estimates of drilling productivity and
estimated changes in production from existing oil and natural
gas wells. The projection is based on seven key shale plays --
the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara,
Permian and Utica. These regions accounted for 95% of US oil
production growth between 2011-13.
The net gain in production is provided by subtracting legacy
declines from new production. Shale oil wells see a burst of
output on completion, but then a sharp rate of depletion over
the first and second years of production. While 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.
Projections for total new production from the seven shale plays
have shown marginal and ever-smaller gains over the same period.
This is the second consecutive month in which the projection has
fallen, with the EIA estimating new production at 336,000 b/d in
April, down from 399,000 b/d for March.
As expected, legacy declines continue to increase, eating into
the new production figures. Legacy declines rose to a new record
high of 335,000 b/d in the March projection for April.
The US shale industry is on the cusp of the inflexion point
where legacy declines start to overwhelm new production, the net
gain becomes a loss and US shale oil output starts to contract.
Nevertheless, overall, US crude production continues to rise. As
of the week ending February 27, the EIA's supply projections
estimated output at 9.324 million b/d, up from 9.134 million b/d
at the beginning of the year.
The four-week moving average for week 4 of each month shows the
rate of increase slowing rapidly from September 2014 through
January 2015 in line with the projected deceleration in shale
output, but jumping again in February.
The month-on-month increase in the four-week moving average
dropped steadily from 229,000 b/d in September to 55,000 b/d in
January, but rose 98,000 b/d in February. This may reflect the
rise in the NYMEX front-month crude contract from $47.71/barrel
at the end of January to $53.54/b February 17. The contract had
subsided back below $50/b by end-February.
--Ross McCracken,
ross.mccracken@platts.com
--Edited by Keiron Greenhalgh,
keiron.greenhalgh@platts.com